Tether Holdings, known for its stablecoin USDT, is looking to lend to commodity markets.
Several commodity trading companies are in talks to obtain US dollar financing from the company. The move represents a change in strategy for Tether, which is now looking to deploy its significant profits into other forms of currency.
But smaller commodity traders face challenges securing credit, and that’s where horses like Tether step in.
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While small businesses need financing assistance and have less access to lenders, prominent businesses like Trafigura Group have access to a wide range of lenders. The possibility of lending to these companies could provide much-needed financial flexibility.
The company plans to provide financing that barely meets the strict conditions required by most traditional lenders. By leveraging its stablecoin, USDT, Tether aims to eliminate credit access issues experienced by companies using critical commodities such as oil, metals, and food. This approach could allow Tether to carve a new place in the world of global trade finance.
Tether Eyes loans in the commodity trading market
This comes after Tether reported significant revenue of $5.2 billion in the first half of 2024, which helped propel the company’s expansion plans.
The commodity sector is a promising opportunity for the company to invest its profits. Tether CEO Paolo Ardoino is optimistic that it has the potential to shake up the world of commodity trading.
Tether is in the early stages of exploring financing opportunities, Ardoino confirmed. However, the company has not yet revealed exact numbers and hopes to gradually expand its involvement.
Adopting this operational shift could open up new revenue streams for Tether as the world begins to crave alternative financing options.
Tether will enter the commodity market as traditional banks exit the space. Some financial institutions have curbed their exposure to commodity trade finance due to recent scandals and high-profile bankruptcies. Tether aims to fill this gap in the market by offering more flexible lending terms.
Tether boosts trade finance amid global tensions
The commodity trading industry has emerged from a difficult period of price volatility and lack of liquidity much healthier.
It also disrupted supply chains and caused commodity prices to soar, at least in part caused by Russia’s invasion of Ukraine. This volatility created liquidity problems and unprecedented profit potential for many trading companies.
Alternative financing to boost the industry, one of Tether’s potential sources, could stabilize the industry.
Due to sanctions, USDT is already being used for cross-border transactions between Russia and Venezuela. This new financial channel comes from the growing acceptance of stablecoins as a payment method in sanctioned regions.
Tether is currently working with its team to develop trade finance solutions that leverage these trends. To stay in touch with key contacts, Tether has increased its exposure in the industry, with its logo plastered on cars and company executives attending major industry events such as LME Week.
The company’s investment arm, Tether Investments, is exploring investment opportunities in biotechnology, AI and alternative financial infrastructure as part of a broader diversification strategy.
