Tether Holdings Ltd, known for its stablecoin USDT, is turning to the commodity market by looking to borrow in this sector.
Several commodity trading firms are discussing the company’s USD loans. This move represents a change in strategy for Tether, which is now looking to invest its significant profits into other forms of currencies.
However, it is difficult for smaller commodity traders to get a loan, and this is where horses like Tether come into play.
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Smaller companies need help with financing and have less access to lenders, while more prominent players such as Trafigura Group have extensive access to lenders. The potential loans for these businesses could provide them with much-needed financial flexibility.
The company plans to offer financing that falls just short of the onerous terms required by most traditional lenders. Tether is seeking to address credit access challenges faced by companies trading in essential commodities such as oil, metals and food with the help of its stablecoin USDT. This approach could allow Tether to find a new place in the global trade finance world.
Tether seeks credit in commodities trading
This comes after Tether made a sizeable profit of $5.2 billion in the first half of 2024, fueling its expansion plans.
The raw materials sector is a profitable business for the company to invest its profits in. Tether CEO Paolo Ardoino is optimistic that the company can shake up the world of commodities trading.
Tether said it was in the early stages of exploring lending opportunities, and Ardoino confirmed this. However, the company has not yet given exact figures and would like to gradually expand its commitment.
With this move, Tether could open up new revenue streams as the world begins to crave alternative financing options.
As traditional banks withdraw from this area, Tether is pushing into the commodities market. Some lenders have scaled back their involvement in financing commodities trading due to scandals and high-profile collapses in recent years. Tether is trying to fill this gap in the market by offering more flexible lending terms.
Tether boosts trade finance amid global tensions
After a difficult period of price volatility and liquidity constraints, the commodity trading industry has recovered significantly.
It also disrupted supply chains and triggered a spike in commodity prices, caused at least in part by Russia’s invasion of Ukraine. This volatility led to liquidity problems and unexpected profit opportunities for many trading companies.
Alternative financing of the industry, one of Tether’s potential lending opportunities, could stabilize the industry.
Due to the sanctions, USDT is already being used for cross-border transactions in Russia and Venezuela. This new financial avenue arises from the growing acceptance of stablecoins as a means of payment in sanctioned regions.
Tether is now working with a team to develop trade finance solutions that leverage these trends. To reach key contacts, Tether puts its logo on its cars and increases its presence in the industry by having company executives attend major industry events such as LME Week.
As part of a broader diversification strategy, Tether Investments, the company’s investment arm, is exploring investment opportunities in biotechnology, AI and alternative financial infrastructure.
