The reserves that validate Tether have always been a topic of discussion and doubt in the crypto world. The FTX case has brought this issue up again during its “recent Tether FUD cycle”, pledging to zero collateralized lending in its reserves by 2023 according to Andrew Throuvalas at Crypto Potato.
What is FUD about?
Earlier this month, the Wall Street Journal called out Tether for its “collateralized lending,” whereby Tether lends its own stablecoin tokens instead of selling them upfront in exchange for hard currency. According to the company’s website, these loans comprised $6.1 billion, or 9%, of its reserves as of September 30.
While Tether claims that these loans are over-collateralized by “extremely liquid” assets, it provides few details about the exact nature of that collateral and who its borrowers are. WSJ used this angle to suggest that these loans create risks for the company to continue to satisfy stablecoin swaps.
“Tether cannot be sure that the loans will be repaid, that it could sell the loans to a buyer for dollars in a hurry, or that the collateral it holds will be adequate,” the company wrote.
Tether’s widespread response, written on Tuesday, dismissed criticism of its collateralized loans as more “misinformation” concocted by “true Tetherers” and the mainstream media (MSM). However, in a commitment to restore faith in cryptocurrencies after the collapse of FTX, he has decided to sell them outright in 2023.
“Tether is professionally and conservatively managed and this will be demonstrated once again by successfully winding down the lending business at no loss (as all loans are over-collateralized by liquid assets),” Tether wrote.
The company reviewed a number of other ways that MSM has been “wrong” regarding Tether, including suspicions that it held 70% of its reserves with Evergrande, and that the trading paper it held in its reserves was unreliable. . In October, Tether confirmed that its commercial paper holdings had been fully sold.
Skepticism running rampant
With multiple major industry players like Celsius, FTX, and Alameda going down, members of the crypto community are pitting themselves against each other with theories about who will go down next.
Panic mounted on Twitter Tuesday as Binance struggled to process billions of dollars in withdrawals, particularly those denominated in USD Coin. Its CEO, Chanpeng Zhao (CZ), assured that any delay in withdrawals is simply due to the need to change BUSD to USDC, which has already been done.
Speaking of USDC: Popular Bitcoiner and economic journalist Max Keizer theorized last week that Circle will be the next big player to go down.
“Circle pays people to use USDC and as such they are on the brink of bankruptcy whereas with Tether, they don’t pay anyone to use USDT,” he said on Friday.
CZ has even been skeptical of Coinbase in recent weeks about the amount of Bitcoin it claims to hold on behalf of Grayscale. However, the CEO was quick to retract the dubious claims after taking a look at Coinbase’s audited financials.