Tether Holdings Ltd, known for its stablecoin USDT is turning towards the commodities market by looking to lend in the sector.
Several commodity trading firms are discussing USD loans from the company. The move represents a change in strategy for Tether, which is now looking to deploy its substantial profits into other forms of currency.
Smaller commodity traders, however, face a challenge in securing credit, at which point horses such as Tether step in.
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Smaller firms need help with financing and have less access to lenders, while more prominent players like Trafigura Group have extensive lender access. The potential loans for these companies could give them much-needed financial flexibility.
The company plans to provide funding that narrowly misses the stodgy conditions that most traditional lenders demand. Tether is trying to eliminate the credit access problems experienced by firms using vital commodities such as oil, metals, and food by using its stablecoin, USDT. This approach could enable Tether to find new places in the global trade finance world.
Tether Eyes Loans in the Commodity Trading Market
It comes after Tether reported substantial earnings of $5.2 billion in the first half of 2024, which helped push its expansion plans.
The commodity sector is a bankable proposition for the company to invest its profits in. CEO Paolo Ardoino of Tether is optimistic it can shake up the commodity trading world.
Tether said it is in the early stages of investigating lending opportunities, and Ardoino confirmed this. However, the company has yet to reveal exact figures and wants to scale its involvement gradually.
By adopting this operational shift, Tether could open up new income streams since the world is beginning to crave alternative financing options.
When traditional banks recede from the field, Tether moves into the commodity market. Some lenders have reined in their commodity trade finance exposure due to scandals and high-profile collapses in recent years. Tether looks to fill this gap in the market by offering more flexible loan terms.
Tether Boosts Trade Finance Amid Global Tensions
Rebounding from a challenging period of price volatility and liquidity shortfalls, the commodities trading industry is much healthier.
It also disrupted supply chains and set off a commodity price surge, driven at least in part by Russia’s invasion of Ukraine. This volatility introduced liquidity problems and unheard-of profit potential for many trading firms.
Alternative financing to power the industry, one of Tether’s potential lending outlets, could stabilize the industry.
Due to sanctions, USDT is already being used for cross-border transactions in Russia and Venezuela. This new financial pathway arises due to the growing acceptance of stablecoins as a payment method in sanctioned regions.
Tether is now working with a team to develop trade finance solutions that leverage these trends. To reach key contacts, Tether is putting its logo on its cars and increasing its exposure in the industry, with company executives attending big industry events such as LME Week.
As part of a broader diversification strategy, Tether Investments, the firm’s investment arm, is considering investment opportunities in biotechnology, AI, and alternative financial infrastructure.