Tether Explores Lending Opportunities in Commodities Trading

Tether Holdings, the issuer of the stablecoin USDT, is considering entering the commodities trading sector through lending initiatives, with discussions currently in their early stages.

Tether CEO Paolo Ardoino confirmed to Bloomberg that the company is in talks with several firms to explore US dollar lending opportunities in commodity trading. “We likely will not disclose how much we intend to invest in commodity trading. We are still defining the strategy,” Ardoino stated, highlighting the significant potential in this area.

The integration of cryptocurrencies in commodities trading is evolving, with the potential to enhance transparency, security, and efficiency in transactions. While major players in the commodities market benefit from extensive credit networks, smaller firms often face challenges in securing financing. For instance, industry giant Trafigura Group boasts around $77 billion in credit lines with approximately 150 institutions.

According to sources familiar with the matter, Tether’s proposal aims to streamline payments and trading processes, potentially circumventing the stringent regulatory frameworks that traditional lenders face.

Tether's Strategic Expansion

Tether has the capital to support this initiative, having reported a substantial profit of $5.2 billion in the first half of 2024. The stablecoin USDT is also experiencing remarkable growth, approaching a market capitalization of $120 billion, marking a new all-time high.

The stablecoin has gained traction in regions like Russia and Venezuela for cross-border transactions. Bloomberg reported that at least two leading Russian metals producers have started using USDT to settle transactions with clients.

The commodities trading industry has faced volatility, particularly after Russia’s invasion of Ukraine, which strained liquidity but also generated record profits for some. The conflict underscored the sector’s reliance on the US dollar, allowing the US government to impose sanctions and leading to an uptick in unregulated financing methods, such as the use of stablecoins in trade.

In response to this growing demand, Tether has assembled a team to explore trade finance opportunities. Additionally, the firm is expanding its focus on artificial intelligence (AI), as announced earlier this year.