The exchanges and crypto trading firms take billions of Tether in the form of bitcoin-collateralized loans [1].

Alex Mashinsky, former CEO of the now-defunct Celsius Network, described how it works [2]:

“If you give them enough collateral, liquid collateral, bitcoin, ethereum and so on ... they will mint tether against it,” he said.

“New USDT is issued for such loans,” he added, and later destroyed when the loan is closed “so it does not permanently increase USDT in circulation”.

If true, this contradicts Tether's claims that it only mints USDT in exchange for USD-backed treasuries.

[1] https://www.dirtybubblemedia.com/p/examining-tethers-secret-...

[2] https://www.ft.com/content/0035016c-29ad-4e6f-9163-2a17df490...