Euler's Twitter announcement said, “Euler, the best DeFi protocol you can’t pronounce, is the first major lending platform to list $USDT as collateral. Bon appétit.”
Since 2017, there has been some form of mistrust and uncertainty as to whether USDT has reserve assets completely backing it.
Despite this doubt, the largest stablecoin, USDT, has continued to make waves in the DeFi sector. The latest is the government proposal made by the lending protocol, Euler Finance. This proposal will enable it to start receiving USDT as collateral for loans.
This move can be termed a “vote of confidence” in crypto’s largest stablecoin. The proposal passed on September 29, with more than 88% of voters in support of the plan. As a result, Euler Finance is now the largest lending protocol on Ethereum to allow users to borrow against their USDT.
Euler announced this on Twitter, saying,
“Euler, the best DeFi protocol you can’t pronounce, is the first major lending platform to list $USDT as collateral. Bon appétit.”
In a statement by Seraphim Czecker, Head of Risk at Euler Labs, he stated,
“There was a lot of FUD [fear, uncertainty, and doubt], obviously back in the day, but at this point, if you talk to the big players, they move hundreds of millions every day in redemptions, and they don’t complain at all.”
As the largest dollar-pegged stablecoin with a $68B market capitalization, Tether possesses a saving mechanism. Here, institutions can redeem their USDT for dollars. In a situation where this mechanism ever fails, it will be a major signal that Tether lacks sufficient liquid dollars to back its coin.
Although Aave and Compound are the two largest DeFi lending protocols on Ethereum that allow users to borrow USDT, both are still unable to use USDT as collaterals. Therefore, users have to collateralize other assets to borrow the coin.
However, if this move by Euler becomes successful, there is a high probability that Aave and Compound might follow suit.
Euler is yet to generate profit since this proposal was voted. The amount of USDT supplied to the protocol is still at about $36M.
In Czeker’s defense, he states that it is due to a lack of awareness. He said most of the biggest active traders in the DeFi and CeFi sectors supported the move for USDT collateralization. Hence, he is optimistic that profits will soon start rolling in.
In his words,
“I think it should add a couple hundred million, medium term.”
