Tether, the largest stablecoin issuer in the crypto market, has experienced an increase in stablecoin lending, or secured loans, in 2023, despite the firm's announcement that such loans would be reduced to zero in December 2022.

Tether stated in its most recent quarterly report that its assets included $5.5 billion in loans as of June 30, up from $5.3 billion the prior quarter. According to a Tether representative, the recent increase in stablecoin lending was caused by a few short-term loan requests from clients with whom the company has "cultivated longstanding relationships." The corporation also intends to reduce such loans to zero by 2024, according to the spokeswoman.

Tether's stablecoin loans had become a popular lending product, allowing clients to borrow USDT from Tether in exchange for collateral. However, due to a lack of transparency regarding the collateral and the borrowers, these secured loans were always mired in controversy.

In December 2022, the WSJ highlighted concerns about the products, claiming that the loans were not sufficiently collateralized. Tether's ability to meet redemption criteria in times of crisis has been called into question by the Wall Street Journal.

Tether addressed the issues in 2022 before announcing plans to phase out secured loans in 2023. The stablecoin issuer dubbed the concerns about secured loans "FUD" at the time, claiming the loans were overcollateralized.

Tether's recent increase in secured loans coincides with the company's expanding market dominance and earnings. In September, Tether announced $3.3 billion in surplus reserves, up from $250 million in 2022. Tether was contacted for comment by Cointelegraph but did not respond.

Sources:

https://cointelegraph.com/news/tether-2023-stablecoin-loans-rise-despite-size-down-plans

https://www.wsj.com/finance/currencies/tether-is-lending-its-stablecoins-again-b11705f2

https://www.wsj.com/articles/rising-tether-loans-add-risk-to-stablecoin-crypto-world-11669875590

https://tether.to/en/tether-addresses-fud-around-secured-loans-reveals-plans-to-reduce-these-to-zero-in-2023/

https://tether.to/en/challenges-plague-banking-industry-as-tether-demonstrates-strength-and-commitment-to-high-quality-principles-amidst-scrutiny-from-wsj