(Bloomberg) — Tether Holdings Inc. is considering lending to commodity-trading companies as it looks for ways to tap into billions of dollars in profits, a move it typically takes to send credit to traditional banks. It has the potential to shake up the industries that depend on it.
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The cryptocurrency company, which is the world’s largest issuer of stablecoin USDT, is in talks with several companies in the credit-hungry sector about U.S. dollar financing opportunities, according to people familiar with the matter who asked not to be identified discussing private conversations. He said he came.
The meeting between Tether and traders included the company’s stablecoin, which has already attracted attention as a way for traders and producers to circumvent the dollar in countries such as Venezuela and Russia, which are subject to a myriad of U.S. sanctions. But it also includes conversations about how it’s being used in more mainstream products. It’s a deal, people said.
Lines of credit are the lifeblood of commodity trading companies that transport millions of dollars of oil, metals and food products around the world. While the industry giants have a vast network of lenders available to them (Trafigura Group had $77 billion in credit facilities with about 150 financial institutions at the end of March), smaller companies are struggling to keep shipping as they continue to ship. may have difficulty accessing the funds they need.
Some of the people said Tether’s pitch was particularly attractive because its financing would not be subject to the same stringent regulatory conditions as traditional lenders and could speed up payments and transactions.
Private credit has made some inroads into commodity trade finance, and while Tether has not provided audited financial results, it says it has the capital needed to participate. In its latest financial filings released in July, Tether reported first-half 2024 profits of $5.2 billion.
In an interview with Bloomberg News, Tether CEO Paolo Ardoino acknowledged that the company is exploring opportunities in the commodity space, which he said are in the “early stages.”
“We probably won’t reveal how much we plan to invest in commodity trading. We are still developing our strategy,” Ardoino said.
“We are interested in exploring different commodity trading possibilities,” he said, adding that he believes the opportunities here “are going to be huge in the future.”
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In most commodity trade finance, banks agree to give traders a certain amount of credit for the purchase and shipment of cargo. Commodity lending is one of the oldest lines of business for traditional banks, in part because it was a relatively safe investment secured by highly liquid collateral.
Break-in
Still, new investors looking to enter the commodity trade finance sector often find themselves in a dilemma. Top traders with simple businesses are usually able to obtain loans from traditional banks at very low interest rates, while investors looking for better returns are out. Sometimes after helping traders with lower creditworthiness make more complex trades in more difficult parts of the world.
A spate of high-profile explosions, bankruptcies, frauds and scandals in recent years have shaken confidence in the sector, causing some of the industry’s biggest financial institutions to pull back from financing natural resource trades.
The commodity trading industry has endured a turbulent few years after Russia’s full-scale invasion of Ukraine caused wild price fluctuations that squeezed industry-wide liquidity but ultimately helped generate record profits. It’s starting to break out.
The war also highlighted the commodity sector’s dependence on the dollar, making it a means for the U.S. government to target natural resource exports with sanctions, resulting in unregulated loans and stablecoins to facilitate trade. created an incentive for the use of
Read: Russian exporters fear lack of funds due to payment delays due to sanctions
Enter USDT: At least two of Russia’s top metals producers are turning to stablecoins to settle cross-border transactions with customers and suppliers, Bloomberg News previously reported. And, according to the Wall Street Journal, Venezuela’s state oil company PDVSA is using the token to receive payments for oil shipments.
Tether employs a team to develop trade finance opportunities, and some of its executives attended two industry gatherings in September – the Commodity Finance Industry Event in Geneva and LME Week in London. He was said to have attended. He was identified, according to officials who asked him not to attend the event.
The company’s investment arm, Tether Investments, evaluates hundreds of proposals each month, with a focus on areas such as alternative financial infrastructure for emerging markets, artificial intelligence and biotechnology.
Read: Tether to invest more than $1 billion in trading over next year
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