Tether Explores Foray into Commodity Trading Sector With New Lending Initiative

Robert Novoski

Tether Holdings, the world’s largest stablecoin issuer, USDTis reportedly exploring loan options for commodities trading companies while looking for new ways to capitalize on profits this year amid a broader market recovery.

According to Bloomberg, the discussions involved potential US dollar lending opportunities with companies in the commodities sector, which often grapple with access to credit.

Tether Eyes New Credit Solution For Commodity Companies

Commodity trading companies that rely heavily on credit lines, such as Trafigura Group, have large networks of lenders, with $77 billion in credit lines from about 150 institutions as of March, according to Bloomberg. On the other hand, small companies often find it difficult to obtain these rights funding they need to keep their operations running smoothly.

Tether’s proposition is particularly attractive because its funding mechanism will not be burdened by the regulatory requirements imposed by conventional banks. This can result in faster payment processing and more efficient trade execution.

Although private credit is starting to enter the commodity trade finance sector, Tether insists that it has the necessary capital to enter this field. In its latest financial endorsement two months ago, Tether reported a huge profit of $5.2 billion in the first half of 2024, which shows its financial strength and investment capacity.

In a interview with Bloomberg News, Tether CEO Paolo Ardoino emphasized that the company is actively exploring opportunities in the commodities sector, although he noted that discussions are still in the early stages. “We are interested in exploring various commodity trading possibilities.”

USDT Used By Russian and Venezuelan Companies

The traditional model of commodity trade financing usually involves banks providing certain credit limits to traders to acquire and transport goods. This business practice is generally considered low risk because liquid guarantee involved.

However, Bloomberg highlights that new entrants to the field of commodity financing face challenges, especially when they face situations marked by major failures and scandals.

The commodities trading sector has experienced significant turmoil in recent years, especially after Russia’s invasion of Ukraine caused extreme repercussions price fluctuations and tight liquidity, indicating the industry’s dependence on the US dollar.

This led the US government to impose sanctions on natural resource exports and reportedly increased interest in alternative funding methods, including the use of stablecoins.

Interestingly, the report shows that at least two of Russia’s leading metal producers have started using Tether’s USDT for cross-border transactionswhile Venezuela’s state-owned oil company, PDVSA, has also adopted stablecoins for payment for oil shipments.

To support its efforts in trade finance, Bloomberg revealed that Tether has created a dedicated team to explore this opportunity. Tether executives have attended key industry events, including the commodity finance summit in Geneva and LME Week in London, further demonstrating the company’s commitment to this new direction.

Tether
The 1D chart shows the total crypto market capitalization surging towards $2.24 trillion. Source: TOTAL on TradingView.com

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