Tether Says It Liquidated a Bitcoin Loan Made to Crypto Lender Celsius

Tether today announced that it has liquidated a loan to crypto lending firm Celsius.

The stablecoin issuer did not specify the dollar value of the loan but said that it managed to settle up with the embattled crypto lender without incurring any losses.

“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,” the company’s announcement read.

Celsius, which ran into trouble last month when it had to pause customer withdrawals from its platform to stabilize its liquidity, had taken out an overcollaterized loan from Tether denominated in Bitcoin. Tether said last month that it had “zero exposure to Celsius apart from a small investment made out of Tether equity in the company.” 

Tether is the company behind the world’s largest stablecoin, USDT. Its token, which is also the most traded cryptocurrency, is thought to be the backbone of the crypto economy. Stablecoins, typically pegged to the U.S. dollar, are important assets for traders since they are used to enter and exit trades for other crypto assets without the need to access USD.

Last month, rumors circulated that a portion of Tether’s commercial paper portfolio, which along with other assets back its reserves, is “85% backed by Chinese or Asian commercial papers and being traded at a 30% discount.” Tether denied this, and said the rumors were fabricated to “induce further panic in order to generate additional profits from an already stressed market.”

The state of Tether’s reserves have been a hot topic for some time now. USDT is supposed to be backed by U.S. dollars or their equivalent, but in the past, critics and even regulators have questioned what is really held in the issuer’s reserves. 

Exposure to a failing crypto company like Celsius would further raise investor eyebrows—especially during a bear market when a number of crypto platforms are struggling to keep their heads above water. 

Celsius, which at one point handled $10 billion in customer assets, mismanaged how it ran its lending platform and executed “high-risk leveraged crypto trading strategies,” only to lose $350 million in customer funds, according to a report from Arkham Intelligence today.

Tether today again tried to reassure its clients and said that it had no exposure to Celsius other than the loan and that it “has never and will never put the integrity of its reserves at risk.”