In the course of an investigation into Tether published on October 7, Bloomberg's Zeke Faux unearthed new information as to the assets backing Tether's USD-pegged stablecoin.
With a current supply of $72.6 billion according to The Block's data, Tether's backing has long attracted major interest. Controversy over that backing has proved central to developing standards of transparency among dollar-backed stablecoins.
Faux reported: "I also learned that Tether had lent billions of dollars more to other crypto companies, with Bitcoin as collateral. One of them is Celsius Network Ltd., a giant quasi-bank for cryptocurrency investors, its founder Alex Mashinsky told me. He said he pays an interest rate of 5% to 6% on $1 billion in loans from Tether."
Celsius provides retail users with interest-bearing accounts. Like competitor BlockFi earlier in the summer, Celsius has become the target of a growing roster of state securities regulators for their interest accounts. The regulators say these are unregistered securities.
When reached by The Block, Mashinsky and representatives for Celsius had no immediate comment as to whether Tether had accounts with the firm. Mashinsky himself tweeted in response to the article:
Earlier in September, Mashinsky told The Block regarding recent scrutiny from securities regulators: "All of these agencies are supposed to be operating in the best interest of their community, of the users, of the actual people who live in this country, and if they do, then they will see that that DeFi/CeFi system is a stable system. And our traditional finance system requires trillions of dollars injected every year or two to keep it going."
"BlockFi at the corporate level has not held Tether funds," a representative for BlockFi told The Block. "Some clients may hold Tether and we would support that activity."
Competing lending platform Nexo did not return a request for comment as of publication time.
Beyond such interest accounts, there have long been rumors that the corporate paper backing Tether includes major investment in Chinese firms. The issue became particularly concerning as Chinese real estate developer Evergrande approached a colossal liquidity crisis after years of offering double-digit returns.
While Tether has denied holding Evergrande debt, the firm has avoided confirming or denying other short-term corporate bonds with Chinese companies. Faux reported finding a document with a detailed account of Tether's reserves, which he says include billions of dollars of such debt.
Tether, for its part, responded to the investigation by dismissing it as "a false and aging story arc about Tether based on innuendo and misinformation, shared by disgruntled individuals with no involvement with or direct knowledge of the business’s operations."