Tether has said that its secured loans are heavily collateralized in response to recent reports claiming Tether-led trouble in the sector.
The Wall Street Journal noted in its report that Tether did not disclose its USDT stablecoin-issued loans. This calls into question its long-term liquidity to honor redemptions. The concerns come after FTX, one of the largest crypto exchanges, filed for Chapter 11 bankruptcy this month. The WSJ highlights that a subsequent drop in the market could weaken Tether’s collateral.
The report also states, “Tether did not disclose what the market cap of the loan was, or whether the collateral included cryptocurrencies.”
In response, Tether said, “The article contained several misconceptions about Tether and USDT, the most obvious of which was the claim that Tether’s USDT secured loans were denominated in USDT, giving Tether a fall in the value of USDT.” had to face.”
Tether under the microscope after the collapse of FTX
Tether has a long history of trouble with regulators. Questions about Tether reserves also arose around the Terra Luna crisis and the market collapse led by 3AC. Once again, the FTX bankruptcy has renewed concerns about the top stablecoin by market capitalization, especially as information about the role of FTX token FTT has shed light on the firm’s highly leveraged position.
That said, USDT also lost its dollar peg after the contagion.
However, Tether argued, “this completely misses the mark and mistakes USDT for the collateral it underpins. Tether’s secured loans are highly collateralized and also backstopped by additional equity if necessary.” goes.
The stablecoin issuer reiterated that its equity is growing rapidly, with 82.45% reserves in US Treasury bonds and other cash equivalents. It continued by saying that the WSJ ignores that the drop in the price of the USDT token is irrelevant in the context of secured loans. Tether explains that these declines only represent the exchange value, rather than the redemption value, of the underlying collateral.
Additionally, media outlets expressed concern about Tether lending its tokens rather than selling them for cash. However, Tether compared it to what commercial banks do with their customers. The latter said, “When a private banking client needs some short-term liquidity and has a significant investment portfolio that he does not wish to sell, the client asks to pledge his portfolio for short-term liquidity. “
continues to defend
This is not the first time that Tether has hit back at news reports calling into question its financial statements. Earlier in August, Tether accused the WSJ of spreading “misinformation”. This was after the news organization suggested that hedge funds were shorting Tether due to its poor financial health. The stablecoin also hit back at Bloomberg this year after the news outlet made serious allegations against it. but the latter called Report “Suspicious.”
Last year, Tether was fined $41 million by the Commodity Futures Trading Commission for claiming it was fully dollar-backed. Since then, Tether has protected its financial position. It said once again, “Tether is not gambling customers’ money, but it is managing its reserves properly and does not enforce fractional reserves.”
Meanwhile, the platform is once again embroiled in a legal tussle. A Bloomberg report claims that the Justice Department is investigating a possible bank fraud case against Tether and its affiliate Bitfinex.
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