Tether vs. Wall Street Journal. Goodbye Secured Loans!

Tether's stablecoin has quite often become the main character of media assassination pointing out shortcomings in its work and predicting its collapse. We have already written about how journalists from the Wall Street Journal devoted their article to USDT, pointing out that if Tether's reserve assets lose 0.3% of the value, the stablecoin would collapse.

Recently, journalists from the WSJ published a new article, this time the emphasis was placed on the fact that Tether issues credits on its stablecoin, because of this there is a risk that the company might not have enough liquid assets to pay off customers in the event of a crisis.

“The company behind the tether stablecoin has increasingly been lending its own coins to customers rather than selling them for hard currency upfront. The shift adds to risks that the company may not have enough liquid assets to pay redemptions in a crisis.” - it’s written in the article.

In a normal scheme, explained also on Tether website, stablecoins are issued against fiat currencies. Then the received cash can be invested. The “loaned” tether coins, in contrast, are put into circulation directly, without exchange with fiat. The latest Tether reserves report disclosed the total amount of such loans at 6.1 billion US dollars. (9% of the total assets), classified as “Secured loans” in the schedule of reserves.

Of course, Tether did not ignore this article and called this article hypocrisy by its reaction on Twitter and directed users to their website, where they prepared a response article describing in detail how their lending system works.

In a message on the official Tether website, they say that from the WSJ article, the reader can draw erroneous conclusions about the provision of loans. Tether claims that all loans are short-term and 100% secured, in addition, if necessary, they are supported with additional capital.

“This completely misses the mark and mistakes the USD₮ itself for the collateral that underpins it. Tether's secured loans are extremely overcollateralized and even backstopped by Tether's additional equity if needed.” - writes Tether.

However, the response article was not the point in this story. Tether decided to go further.

In its new appeal to users on the official website, the company stressed that in times of instability in the crypto market, it is difficult to maintain the trust of customers. The situation with Tether has also been complicated by the fact that they often feature in headline articles and become the main character of rumours, which can affect the company's reputation. In this regard, Tether is going to make its work even more transparent and increase the level of trust in the company by completely abandoning secured loans in 2023.

“Understandably, after the events that have unfolded this year, the company recognizes that it is mission critical to restore faith in the market. Today, in addition to dismissing the recent cycle of Tether FUD that’s hitting the rumour mill, Tether is announcing starting from now, throughout 2023, it will reduce secured loans in Tether’s reserves to zero.” - writes Tether.

It's good that such articles encourage the Tether team not to be complacent. Previously, the weak point of the company was the reserves of a stablecoin, expressed in commercial securities. This was often written about in the media, questioning the reliability of the company, but Tether reduced the number of commercial papers to zero. Now loans have become a weak point and a reason for criticism. Let's hope that everything goes according to plan for Tether, and there will be fewer attacks from the media. We will continue our observations and inform you about the news!