Tether Explores Lending Opportunities in the Commodities Trading Sector

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Sujha Sundararajan

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Sujha Sundararajan

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Last updated:

October 15, 2024 03:08 EDT

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Stablecoin USDT issuer Tether Holdings is considering lending to commodities trading firms, and the explorations are “in early stages.”

Tether CEO Paolo Ardoino confirmed with Bloomberg that the company is already in talks with several firms, discussing US dollar lending opportunities.

“We likely are not going to disclose how much we intend to invest in commodity trading. We are still defining the strategy.”

Ardoino stressed that opportunities are “massive in the future”, and Tether is interested in exploring different commodity trading possibilities.

The role of cryptos in commodities trading is still evolving, but they have the potential to revolutionise the industry. They provide greater transparency, security and efficiency.’

Major players have access to extensive credit networks in commodities trade financing, whereas small firms often struggle to secure financing. For instance, giant traders like Trafigura Group has an enormous network of credit – $77 billion in credit lines with about 150 institutions.

According to individuals familiar with the matter, Tether’s proposal aims to streamline and speed up payments and trades. This would potentially evade the same stringent regulatory conditions as traditional lenders.

Tether Explores New Horizons

Tether noted that it has the capital required to participate. The company reported a massive $5.2 billion profit in the first half of 2024.

Furthermore, the native stablecoin USDT has seen remarkable growth and constantly maintains a dominant position in the stablecoin sector. USDT is approaching a $120 billion market capitalisation, a new all-time high for the token.

The stablecoin has also gained traction in Russia and Venezuela for cross-border transactions. Per the Bloomberg report, at least two top Russian metals producers have turned to USDT to settle transactions with clients.

The commodities trading industry witnessed a downfall marked by significant price volatility following Russia’s invasion of Ukraine. Though it strained liquidity across the sector, it alternatively generated record profits.

The war also highlighted the sector’s dependence on the US dollar, enabling the US government to impose sanctions. As a result, there was an increase in unregulated financing methods such as using stablecoins in trade transactions.

In a move to capitalise the demand and increasing trend, Tether has hired a team to develop trade finance opportunities.

Further, Tether is also working on expanding its artificial intelligence (AI) focus, as announced by the firm in March.