On July 8, 2022, the company behind the largest stablecoin in the world, Tether, revealed that the firm liquidated a loan made to the crypto lender Celsius, and the liquidation caused “no losses to Tether.” According to the stablecoin issuer, the bitcoin loan to Celsius was “overcollateralized” by roughly “130%+.”
Tether liquidates Bitcoin loan from Celsius – Stablecoin issuer stresses that it will “never put the integrity of its reserves at risk”
The Tether company informed the public that the company “never has and will never jeopardize the integrity of its reserves”. Tether noted on Friday that it had an investment in Celsius, the troubled crypto lender, but the investment was “a minimal portion of its shareholder’s equity.”
A loan denominated in bitcoin (BTC) was taken out by Celsius and Tether said the loan was overcollateralized by more than 130%. “The decision to liquidate the collateral to cover the loan was a part of the original terms of the agreement between the two entities and reconfirmed in writing before the start of the liquidation event,” Tether detailed. The stablecoin issuer added:
This process was conducted in such a way as to minimize any impact on the markets as much as possible and in fact, once the loan was covered, Tether returned the remaining portion to Celsius as per its agreement. The Celsius position was liquidated without any loss to Tether.
Stablecoin Issuer Says Tether Critics ‘Have No Understanding of How Lending, Borrowing, and Risk Management Work’
The company’s blog post added that Tether leverages risk management processes and the firm states that “while the media, critics, and community were wrongly fixated on Tether, other lenders including notable names in the space were blatantly providing lending facilities with nearly zero collateral.” Those kinds of lending practices go against the ethos of Tether and the company’s “strict regulatory practice.”
Meanwhile, over the past few weeks, a slew of crypto firms have shown exposure to companies like Celsius and crypto firm Three Arrows Capital (3AC). The Keyfi founder is suing Celsius over the NFT whale also known as ‘0xb1’, accused the company of being a ‘Ponzi scheme’ and allegedly allowed his entire portfolio to have ‘a bare exposure to the market”.
It was further reported this week that Blockchain.com lost $270 million from 3AC exposure and crypto companies like Voyager Digital, Blockfi, Babel Finance, and Vauld were all affected by 3AC’s financial issues.
Today, stablecoins have an aggregate market capitalization of around $154 billion, and $65.9 billion worth of USDT is managed by Tether. In the last 24 hours, there has been $100 billion in global trade volume in the crypto markets, and USDT commands $66.6 billion of that volume.
Tether’s blog post about the Celsius bitcoin loan highlights how the company has been vilified by critics over rumors and speculation. “Critics who make claims of Tether’s inconsistencies clearly have no understanding of how lending, borrowing, and risk management work,” Tether’s blog post on Friday concludes.
