Bloomberg reported on October 14 that Tether Holdings is considering lending to commodity trading companies as the stablecoin issuer expects to make billions of dollars in profits.
Tether, which issues USDt (USDT), has discussed US dollar financing opportunities with multiple commodity trading companies, Bloomberg reported on condition of anonymity, citing people familiar with the matter.
Tether did not immediately respond to Cointelegraph’s request for comment.
Related: Tether reports record $5.2 billion profit in first half of 2024
Amid these discussions, stablecoin issuers also reportedly considered the possibility of Tether playing a role in mainstream commodity trading.
Commodity traders rely heavily on credit to finance international shipments of goods such as oil and precious metals.
Companies that specialize in commodity derivatives such as futures and swaps also rely on credit to finance their transactions. Futures linked to the spot price of cryptocurrencies are rapidly gaining popularity.
Source: CME Group
A futures contract is a standardized contract to buy or sell an underlying asset at a future date. These play an important role in institutional investors’ hedging strategies. Futures are also popular for speculation because they allow traders to double down on directional bets with leverage.
Nearly $290 billion of customer funds are entrusted to brokerage firms that specialize in futures and options trading, according to a September report filed by the U.S. Commodity Futures Trading Commission.
Futures positions are typically financed primarily through leverage, with only a portion of the value of each contract being paid upfront by collateral or “margin” posted by the trader.
Tether made a record profit of $5.2 billion in the first half of 2024 and held more U.S. government bonds than ever before, according to a July 31 announcement.
This growth reflects the continued adoption of the USDt stablecoin, which Tether says is backed 1:1 with liquid USD-denominated assets. This figure is based on attestation from BDO, an independent accounting firm.
Source: CoinMarketCap
According to CoinMarketCap, USDt’s market capitalization was approximately $120 billion as of October 14th.
Tether said it reinvests a portion of its profits into adjacent industries such as sustainable energy, Bitcoin (BTC) mining, data, artificial intelligence infrastructure, peer-to-peer communications technology, neurotechnology, and education.
Tether CEO Paolo Ardoino said in an interview with Bloomberg that the company is exploring opportunities in the commodity space and is still in the “early stages.”
“We probably won’t reveal how much we plan to invest in commodity trading. We’re still developing our strategy,” Ardoino told Bloomberg.
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