The recent collapse of the crypto exchange FTX has shaken the confidence of users in lending, custody, and cryptocurrency service providers. The fear of losing assets now plagues the crypto community, with experts predicting that it might take some time for the fear, uncertainty, and doubt (FUD) to dissipate.
During these critical times, crypto firms are experiencing the impact of the FUD spurred by the FTX incident and are striving to regain the trust of their customers. For instance, Tether, the largest stablecoin issuer, has promised to cease lending funds from its reserves, emphasizing that restoring consumer faith in the crypto market is crucial.
In an attempt to address the FUD surrounding its secured loans, Tether issued a press release on December 13th stating that its loans are fully collateralized and supported by “extremely liquid assets.” Additionally, the firm announced plans to halt its loan services throughout 2023. Tether explains that, unlike bank loans that employ fractional reserves, its secured loans are fully-backed.
These assertions by Tether seem to challenge the claims made by the Wall Street Journal earlier this month, which alleged that Tether’s secured loans might be risky and that the company might not possess enough liquid assets to handle loan redemption during a crisis. Interestingly, this wasn’t the first time Tether had to address FUD attacks from the Wall Street Journal.
Back in August, the media outlet claimed that Tether could become technically insolvent if its assets declined by just 0.3%. At the time, Tether denied the claim and said it had recruited a top-5 account firm to enhance the credibility and transparency of its financial attestations. According to Tether, 82% of the company’s reserves are held in “extremely liquid assets.” In October, the firm swapped commercial paper in its reserves for US Treasury Bills in response to further media FUD.
As part of its latest statement, Tether confirmed that it plans to reduce its lending services without incurring losses while concentrating on promoting transparency and accountability. This commitment demonstrates Tether’s determination to counter media skepticism through resilience, transparency, and accountability.
Currently, Tether is the leading stablecoin issuer, with around 66 billion USDT in circulation and a 46.6% market share according to CoinGeko data. The Tether stablecoin is trading at $1, experiencing a 24-hour decline of -0.1%, and ranking third in market capitalization.
On the other hand, the broader cryptocurrency market appears to be witnessing a price rally, with Bitcoin gaining 2.32% in the last 12 hours, trading at $17,817.13, and Ethereum increasing by 3.28% in the past 24 hours, trading at $1.323.40.
Source: Cryptonews
