Tether’s parent company said on Friday that it has effectively liquidated its position to struggling cryptocurrency lender Celsius Network without suffering losses.
Tether, the world’s largest stablecoin, stated that it was able to settle a loan to Celsius without incurring any losses because it used Bitcoin worth 130 percent of the loan’s value as collateral. Tether explained that this was done “in order to minimize any influence on the markets as much as possible.”
“In fact, once the loan was covered, Tether returned the remaining part to Celsius, as per its agreement,” he added.
The announcement comes as Celsius fights to avoid declaring bankruptcy after its attorneys and restructuring experts encouraged it to do so late last month. Last month, Celsius was forced to freeze all customer withdrawals after being caught off guard by the bankruptcy of hedge firm 3 Arrows Capital, to whom it had lent money.
While this disclosure dispels particular concerns that Tether’s exposure to 3AC may threaten its reserves and hence the integrity of its dollar peg, it confirms suspicions that at least some of those reserves are invested in assets. extremely dangerous Tether’s latest public information shows that “other investments,” including digital assets, amounted to 6% of its total reserves. It also still has significant volumes of commercial paper issued by corporations whose names and ratings are not public knowledge.
“Tether stated that there is no link between this investment (with Celsius) and Tether’s own reserves or stability.”
Tether’s technical director, Paolo Ardoino, stated in June that Tether intended to eliminate any worries about the soundness of its reserves by lowering the amount it maintains in commercial paper to zero. Ardoino had previously stated that he intended to keep $8.4 billion in CP by the end of June, and that he would reallocate that money to zero-risk Treasuries and cash as it went. CP maturity assessment
Tether’s market worth decreased by $83 billion before crypto assets fell to about $66 billion on Friday. When investors redeem their cryptocurrencies to trade them for fiat currency, the value of USDT in circulation lowers automatically.
Meanwhile, for Celsius clients, the liquidation of the Tether loan limits the amount of assets accessible to the network, which is still juggling its responsibilities. In the case of a Chapter 11 filing, its depositors will most likely be treated as unsecured creditors, with limited possibility of complete recovery of their assets.