Stablecoin issuer Tether has lent billions of dollars to crypto companies, including $ 1 billion to Celsius Network, according to a Bloomberg report. These new details emerge just as Celcius is also in trouble for violating state securities laws. Here is everything you need to know.
How does Tether work?
Tether is known as the stablecoin. About Tether Holdings Ltd. it takes several dollars from crypto traders and credits their digital wallets with a similar amount of tethers. Consumers can then use the tethers on cryptocurrency exchanges to bet on the price of Bitcoin, Ether or other coins.
The company works more like a bank by holding customers’ dollars so it can give them back to any user who wants to return their tokens and get their cashback.
Where did the controversy begin?
According to the Bloomberg report, Tether Holdings now holds an equivalent of $ 69 billion in real money to cover the coins. That amount would make the company one of the 50 largest banks in the US if it were a bank. This year the company started issuing a lot more digital coins, which sparked a lot of speculation.
Of the 69 billion tethers currently in circulation, 48 billion were issued this year. This financial information raised many questions about why Tether minted so many coins and whether it has this amount of cash.
The tether and Celsius connection
Bloomberg’s investigation found that Tether had loaned billions of dollars to crypto companies and large Chinese corporations using Bitcoin as collateral.
Aside from the Chinese companies, Tether Celsius Network Ltd. $ 1 billion borrowed. Company founder Alex Mashinsky also announced that he will pay an interest rate of 5 to 6% on the loan.
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It’s not the first time the two companies have been linked. Back in June 2020, Tether was the main investor in the Celsius Network’s $ 30 million financing round.
Celsius has been in the news lately for violating state securities laws in Alabama, New Jersey and Texas. And just recently, Kentucky issued an injunction against the company. The states are taking action against the company over its crypto loan product.
What’s next with Tether?
With speculation about Tether’s fortune mounting, the Treasury Department had begun to discuss whether the stablecoin should be regulated like a bank. As the company grows in popularity with crypto traders, it will be interesting to see how this is implemented.