After the massive losses that followed the collapse of the crypto exchange FTX, users lost confidence in lending, custody, and cryptocurrency service providers.
The fear of losing assets, as with FTX, plagues people's minds after the commotion.
Some experts believe it will take a while for fear, uncertainty, and doubt (FUD) to clear from people's minds.
It is a critical time for crypto firms as many are experiencing the effects of the FUD caused by the FTX collapse.
Many of them are struggling to gain back customers' trust. In this light, Tether has pledged to stop lending funds from its reserves.
The largest stablecoin issuer reasoned that restoring consumers' faith in the crypto market is critical.
Tether Debunks Rumors of Its Secured Loan Being Risky
In a December 13 press release, Tether addressed the media FUD concerning its secured loans.
Contrary to the circulating rumor, Tether assured that its secured loans are fully-collateralized and backed by "extremely liquid assets."
It also revealed its plans to stop the loan services throughout 2023.
According to the firm, the so-called secured loans operate like private bank loans with collateral.
But in contrast to bank loans that use fractional reserves, Tether said its loans are fully-backed.
Tether's statement could be in response to Wall Street Journal’s claims earlier this month, alleging that the firm’s secured loans are risky.
The journal claimed that Tether might not have enough liquid assets for loan redemption if a crisis occurs.
It wasn't the first attack Tether has received from the Wall Street Journal.
In August, the media outlet alleged that Tether could be technically insolvent if its assets drop just 0.3%. However, at that time, Tether refuted the
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