Tether has pledged to eventually stop the practice of lending out funds from its reserves, saying it is mission critical to restore faith in the crypto market.
The stablecoin issuer addressed recent mainstream media FUD concerning its secured loans, among other FUD that h hit the rumor mill.
Tether reiterated that its secured loans are over-collateralized and covered by extremely liquid assets, while also adding that the firm would be eliminating these loans throughout 2023.
Tether’s secured loans operate similarly to private banks lending to customers using secured collateral, the company explained. However, unlike banks that operate on fractional reserves, Tether claimed that its loans are over 100% backed.
The move is likely in response to a Wall Street Journal report earlier this month alleging these loans were risky, claiming that the company may not have enough liquid assets to pay redemptions in a crisis.
