It appears the back-lash of Sam Bankman-Fried bankrupting the world’s #3 cryptocurrency exchange will not end anytime soon. Now it’s even being reported stablecoins are effected. The WallStreet Journal reported earlier today, Tether Holdings Ltd. (THL), has been giving out Tether (USDT) loans, without the dollars to back each Token.
THL was giving out loans for ‘extremely liquid’ collateral, but apparently the juice dried up.
By extremely liquid, the company supposedly meant it gave loans to people who either had dollars or assets that could be converted to dollars immediately. That method may have failed.
Tether Loans, USDT Misuse, & US Dollar Reserves
As of the end of September 2022, the stablecoin company gave out $6.1-billion-dollars in loans. That represented 9% of the company’s total assets.
Tether supposedly had over $67-Billion in total assets at the time, according to that report made.
Now there’s growing concerns that the USDT coin producer does not have a dollar per coin to back the $6.1-billion it’s loaned out.
THL does not publish audited financial statements. And the company is based in the British Virgin Islands which out of the jurisdiction of the United States government; Strange considering the cryptocurrency brand name is understood as “United States Dollar Tether Coin” by most.
Little is known about the loans Tether’s giving out. Information is kept very private. However Alex Welch, a spokesperson for the brand claims USDT only allows short-term loans with guaranteed, extremely liquid collateral.
Analyst In Disbelief Of Accepted Audit Practices
Peter Crane, a finance analyst spoke on the murky business practices.
He questions, ‘“If you do have reserves, why wouldn’t you show them?”
The Crane Data company founder also believes it’s crazy stablecoins like Tether and other cryptocurrencies have gotten away with such practices for so long.
Beyond this, every time USDT representatives speak, they seem to contradict prior statements made via interview or their own website.
Now, Tether Holding’s Ltd says they give out highly secured loans. However, on their website, the digital currency maker claims to only sell USDT for dollars — or in Layman’s terms, THL only offers the selling of 1 USDT for $1.
This news comes after a rough week for the popular stablecoin. Though it does usually keep a price of $1, it’s been going up and down by 1-cent constantly the past 7 days or so.
USDT is available on almost all, if not 100%, of the Top 50 crypto-exchanges. It’s widely utilized by the crypto-exchanges BitFront and FTX, which recently closed. Also by BlockFi and Genesis, two Goliath cryptocurrency lenders who are currently collapsing as well.
Another woe for the cryptocurrency world, hopefully this will be straightened out and Tether will hold true to the word ‘stablecoin.’ There’s currently an estimated $60-billion-dollars in tokens being held by consumers globally. If this crashes, it could be an extreme devastation on both the digital currency world and global economy.