Cryptocurrency company Tether has been accused of making risky loans. How has the company responded?
The Wall Street Journal has published serious allegations against Tether, the issuer of USDT’s largest steblycoin. The publication claims that Tether is “increasingly lending its own coins to customers rather than selling them for hard currency. Such practices “increase business risk that the company may not have sufficient liquid assets to cover.” Tether representatives responded to the article and refuted the arguments against the company. We tell you more about the situation.
We checked the current data: today, the Tether USDT network accounts for the largest share of the Tether USDT offering, with $37.14 billion. Second place goes to Etherium, which has USDT in the equivalent of $32.3 billion.
USDT volume in different blockchains
That said, November 2022 turned out to be a record year in terms of the volume of transfers in Stablecoin across all blockchains. Apparently, the collapse of cryptocurrency exchange FTX caused crypto enthusiasts to exit many positions into steibles for fear of further market collapse.
Transaction volumes in stabelcoins
On top of that, they were also actively conducting transactions in dollar-linked coins.
What Tether is accused of
WSJ reporters claim to have examined Tether’s financial reports, which confirm the issuance of the aforementioned loans. According to the latest report, the amount of the loans reached $6.1 billion as of September 30, which is 9 percent of the company’s total assets.
It should be noted that 9 percent is a small fraction of total loans. A case in point here is FTX, which had $900 million in liquid assets the day before the bankruptcy filing. At the same time, the company had $9 billion in liabilities. And so in the case of Tether - even if this data is true - the situation is just the opposite.
Tether has published a rebuttal to the news outlet’s arguments on its blog page.
Much of the company’s article is an attack on major media outlets, which did not foresee the collapse of several significant crypto platforms this year at all. Meanwhile, journalists have been spreading rumors about Tether for a long time, and this unsubstantiated information hurts both its business and the industry as a whole. There is some truth in the media’s criticism: for example, many popular publications are still trying to put Sam Bankman-Fried, the former CEO of the bankrupt FTX exchange, in a good light. And The Wall Street Journal is among this activity too.
Article about Sam Bankman-Fried in The Wall Street Journal
However, Tether does not deny that it has been making loans. According to CryptoPotato’s sources, WSJ journalists wrote that because Tether’s USDT loans were denominated in the same token, the company is at risk of seeing the value of the stabelcoin decline. Regarding this, the following quote can be found on the Tether blog.
This statement is completely untrue and mistakenly takes USDT itself as collateral. Tether loans are very highly collateralised and even backed by additional capital if needed.
Tether reserves
Tether has shared information about its reserves several times this year. In reports, the company has stated that it is gradually reducing the proportion of commercial paper in its reserves to ensure that the stabelcoin’s collateral remains as independent of fluctuations in different markets as possible.
Read also: New York court doubts the integrity of Tether USDT's stablcoin creator. What's going on?
That said, mainstream journalists should have paid more attention to the public return of donations from Bachmann-Fried by US politicians. The day before, the OpenSecrets platform, which tracks financial flows and lobbying in the political sphere, published a list of US officials who publicly turned down Sam’s donations after his exchange filed for bankruptcy.
The data shows that the former FTX executive donated $46.5 million over the entire time, with most of the money going to Democrats, Decrypt reports. Sam is second only to George Soros, the biggest contributor to the US Democratic Party, in terms of the volume of his infusions. Of all the politicians, only $1.2 million, or just 3 percent of all the money donated by Bachmann-Fried, has been returned or transferred to charities.
American politician Beto O’Rourke
The lion’s share of the aforementioned million dollar figure was returned by Beto O’Rourke, a member of the US House of Representatives from the 16th electoral district of Texas. His spokesman said the funds donated to O’Rourke’s gubernatorial campaign were returned a week before FTX declared bankruptcy. Here’s the relevant line.
The contribution was unsolicited and an upcoming campaign report will state that it was returned as early as November 4 – before news of the sponsor came out.
O’Rourke also received $100,000 from former FTX engineering chief Nishad Singh, but has yet to say whether that money has also been returned.
We think the trend of trying to create panic around the Tether USDT stabelcoin is quite amusing. It recurs regularly - and especially during bearish trends. In the meantime, Tether continues to operate and has no problem providing coin withdrawals to users on demand. Obviously, The Wall Street Journal representatives in this case would have been more ethical to turn their attention to their own coverage of the Sam Bunkman-Friede persona, whose actions have caused ordinary people to lose billions of dollars.
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