Tether says it liquidated Celsius loan at “no loss”
World’s largest stablecoin issuer, Tether said the loan taken out by embattled crypto lender Celsius has been fully liquidated without a loss.
According to the statement, Tether’s lending activity with Celsius has always been overcollateralized as with any other borrower and has no impact on the company’s reserves. The announcement also described the decision to liquidate the collateral to cover the loan as a part of the original terms of the agreement between the two entities. Tether also said it reconfirmed these terms with Celsius in writing before the start of the liquidation event
While Tether’s portfolio does include an investment in Celsius, the issuer said it represents a minimal part of its shareholder’s equity and there was no correlation between this investment and USDT reserves.
“The Tether loan that was taken out by Celsius was an overcollateralized loan denominated in BTC (130%+). This process was carried out in a way to minimise as much as possible any impact on the markets and in fact, once the loan was covered, Tether returned the remaining part to Celsius as per its agreement. Celsius position has been liquidated with no losses to Tether, it further explains.
“Tether has developed a set of risk metrics and risk measurement processes, which allows the investment and financial teams to evaluate the risk of any of the company’s financial interactions. Tether’s risk culture demonstrates an understanding of both the business of lending and takes into account the regulatory landscape in order to achieve and maintain its business objectives,” the stamen further reads.
Earlier last month, Tether dismissed reports suggesting that the majority of its commercial paper portfolio is backed by Chinese or Asian securities being traded at a 30% discount.
Tether, which is closely affiliated with crypto exchange Bitfinex, has drastically reduced its holdings of commercial debt in its reserves over the last six months. Instead, the stablecoin issuer allocated most of its non-fiat reserves to Treasury bills, almost doubling assets in short-term government securities.
As it stands now, over 47% of total USD₮ reserves are US Treasuries and commercial paper makes up less than 25% of USD₮’s backing.
Regarding the recent events impacting Celsius, Tether confirmed that its lending activity with Celsius has always been overcollateralized, just as with any other borrower. As such, Tether has currently zero exposure to Celsius apart from a small investment made out of its own equity.
Tether also issued a response to a surfaced report suggesting that it has lending exposure to Three Arrows Capital. It denied the rumors, even accusing the authors of unethical motivations.
The new disclosure comes as the meltdown in other stablecoins rippled through cryptocurrency markets and pushed USDT itself below its dollar peg.