Tether's reports show increasing loans denominated and payable in its own stablecoin, reaching $6.1B as of September 30, a potential risk in a crisis
Tether reports hadn't disclosed that loans it issues are denominated and payable in the token — The SEC's Strategy for Enforcing Regulation on Crypto, Explained Tweets: @patio11 , @anthony , @bitboy_crypto , @219_eth , @beijingpalmer , @charlesarthur , @silvermanjacob , @ldrogen , @modeledbehavior , @modeledbehavior , @elidourado , @marisakendra , @bradydale , @joshua_t_white , @jasonfurman , @jonathanweil , @jasonfurman , @wublockchain , and @bitfinexed Tweets: Patrick McKenzie / @patio11 : It's good to see the mainstream financial press start taking a serious look a Tether and realizing that they are pathologically incapable of telling a consistent story that makes sense. https://www.wsj.com/... Anthony DeRosa / @anthony : Tether, which is incorporated in the British Virgin Islands, doesn't publish audited financial statements or a complete balance sheet, leaving outsiders with an incomplete picture of the company's financial health https://www.wsj.com/... Ben Armstrong / @bitboy_crypto : This is the @Tether_to vault inside the main location of @deltecbank. Pretty cool they left the door wide open. This is one of my top 3 favorite pics I've ever been in. There should have been 640 pallets worth of money in this vault to match their $USDT supply https://twitter.com/... @219_eth : the funniest part about tether is its the free market totally crushing chinas digital yuan and the team that wins from it (The USA) hasn't even realized it. James Palmer / @beijingpalmer : ‘tether makes the poker chips for the crypto casinos’ is a really good one-line description of how ‘stablecoins’ work. only imagine if, like, your chips could themselves collapse at any moment. (still delightful that Ryan from the O.C. is one of the best crypto investigators) https://twitter.com/... Charles Arthur / @charlesarthur : I'd say Patrick should change his middle name to “Cassandra”, but people do listen to him as well as his prophecies coming true. So, here we go. https://twitter.com/... Jacob Silverman / @silvermanjacob : Confirming what many had suspected for years, and it might explain Alameda: “The company behind the tether stablecoin has increasingly been lending its own coins to customers rather than selling them for hard currency upfront.” https://www.wsj.com/... Leigh Drogen / @ldrogen : Oh boy Normally I would dismiss the Tether fud but if 10% of Tethers book is USDT denominated loans backed by some unknown collateral and potentially to related parties, we need to know what the collateral is https://twitter.com/... Adam Ozimek / @modeledbehavior : Checking in on the “fully backed” stablecoins https://www.wsj.com/... https://twitter.com/... Adam Ozimek / @modeledbehavior : Whole article is pretty bad look for stablecoins https://www.wsj.com/... Eli Dourado / @elidourado : I...would not hold Tether https://www.wsj.com/... Marisa Kendra / @marisakendra : Ticking time bomb 🔥https://www.wsj.com/... Brady Dale / @bradydale : So basically @Tether_to has been copying @MakerDAO? It does sound like a pretty small piece of the overall pictures, but these are uncertain times https://www.wsj.com/... Josh White / @joshua_t_white : “Tether, which is incorporated in the British Virgin Islands, doesn't publish audited financial statements or a complete balance sheet.” Stablecoin regs and proof of reserves should be crypto priority #1 for Congress https://www.wsj.com/... Jason Furman / @jasonfurman : Tether claims to have assets to back its coins but won't show audited statements. And some of those assets are loans. And the loans are denominated in Tether. So if Tether goes down relative to the dollar so does the value of those assets. Why take this risk for 0% interest? Jonathan Weil / @jonathanweil : Loans were 9% of Tether's assets as of Sept. 30. All of them were loans of tether tokens, a point not disclosed in the company's quarterly financial reports. Many details remain unclear, including the borrowers and the collateral. #Tether My latest: https://www.wsj.com/... Jason Furman / @jasonfurman : Some crypto is too good to be true promising outlandish interest rates. Tether is too bad to be true. In the best case get 0% interest. In the worst case lose money. All downside (including the use case, facilitating buying other even worse crypto). https://www.wsj.com/... Wu Blockchain / @wublockchain : WSJ: Tether had provided loans of US$6.1 billion as of September 30, and the figure at the end of 2021 was US$4.1 billion. Tether says it lends only to eligible customers and requires that borrowers post lots of “extremely liquid” collateral. https://www.wsj.com/... @bitfinexed : Oh look, more admissions that Tether prints Tether out as a loan instead receiving actual money. Shitcoins accepted as collateral. Things that you would have already known if you followed me. https://t.co/YmU2KZWUuZ
Context & Ripple Effects
Tether has spent 2022 absorbing stress tests that most issuers never face: a May depeg that triggered $8.5B+ in redemptions, a shrinking commercial paper pile disclosed at $20.1B, and an $840M USDT loan to Celsius now under examination in bankruptcy court. Through it all it has kept operating without audited financials, promising one since 2017.
The WSJ's new reporting adds a layer outsiders couldn't see: $6.1B of loans denominated and payable in USDT itself, undisclosed in the quarterly reports. That makes Tether both lender and unit of account for its own credit book — and means the asset side of its balance sheet moves inversely to the very peg it must defend.
First-order effects
- Borrowers holding $6.1B in USDT-denominated debt now carry liabilities whose real burden rises exactly when Tether wobbles, while Tether books loan assets that lose dollar value in any depeg scenario — a correlated risk its quarterly reports never flagged.
- The disclosure gap sharpens scrutiny of Tether's accounting firm attestations, which cover asset composition but have not covered how its loans are denominated.
Second-order effects
- Rival issuers gain a concrete talking point: Circle's USDC picked up $3.4B and Binance USD $1.2B during the May run, and opaque self-referential lending gives them a differentiation argument aimed at institutional treasurers choosing reserves.
- Creditors in crypto bankruptcies — where Celsius lawyers are already testing how a USDT loan recovers — now face a harder valuation question when the loan currency is the debtor-affiliated issuer's own token.
Third-order effects
- If self-denominated lending proves systemic across stablecoin issuers, regulators get their clearest case yet for reserve-and-lending rules that treat stablecoins as money-market-like credit vehicles rather than pure payment tokens — pressure Tether already faces via the SEC and Congress.
- The pattern points toward a two-tier stablecoin market: audited, bank-transparent issuers capturing institutional flow, and offshore issuers surviving on retail and crypto-native demand through intermediaries of the kind WSJ reporting says Bitfinex and Tether used to keep banking access.
The trend: Stablecoin issuance is splitting between transparent, audited reserve models and offshore operators whose balance-sheet opacity — self-denominated loans included — keeps drawing regulatory attention as each crisis reveals a new undisclosed exposure.