Tether says it lends only to eligible customers and requires that borrowers post lots of "extremely liquid" collateral, which could be sold for dollars if borrowers default. These loans have appeared for several quarters in the financial reports that Tether shows on its website. In the most recent report, they reached $6.1 billion as of Sept. 30, or 9% of the company's total assets. They were $4.1 billion, or 5% of total assets, at the end of 2021.
The rise in Tether's lending represents a broad risk to the crypto world. Stablecoins such as tether are anchors in the system. They are vital for trading many cryptocurrencies and are widely held by traders. The premise of tether -- and other stablecoins -- is that the issuer always will redeem one coin for $1. Issuers take pains to demonstrate they have ample funds available to do so. The company's reports show only U.S. dollar amounts for the loans and don't say the loans were made in tether tokens. The reports also say the loans were "fully collateralized by liquid assets."
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