On July 8, 2022, the company behind the world’s largest stablecoin, Tether, disclosed that the firm had liquidated a loan to crypto lender Celsius, and that the liquidation had caused “no loss to Tether. “. According to the stablecoin issuer, the bitcoin loan to Celsius was “overcollateralized” by around “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 bitcoin (BTC) denominated loan was taken out by Celsius and Tether said the loan was over-collateralized by more than 130%. “The decision to liquidate the collateral to cover the loan was part of the original terms of the agreement between the two entities and reconfirmed in writing prior to 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. 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 company states that “while the media, critics, and community were wrongly obsessed with Tether, other lenders, including names notables in the space, were blatantly providing lending facilities with almost no collateral”. These types of lending practices go against Tether’s ethics 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 due to exposure to 3AC and crypto companies like Voyager Digital, Blockfi, Babel Finance and Vauld were all hit by the financial issues of 3AC.
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 Bitcoin Celsius loan blog post highlights how the company has been vilified by critics over rumors and speculation. “Critics who claim Tether’s inconsistencies clearly don’t understand how lending, borrowing, and risk management work,” Tether’s Friday blog post concludes.
What do you think of Tether’s liquidation of the bitcoin loan taken out by Celsius? Let us know what you think about this topic in the comments section below.
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