Tether (USDT) Issuer Explores Lending Options for Commodity Trading Companies

Tether Holdings, the issuer of the world's largest stablecoin, USDT, is reportedly exploring lending options for commodities trading companies as it seeks new ways to deploy this year's profits amid the broader market recovery.

Tether, the company behind the world’s largest stablecoin USDT, is reportedly looking at lending options for commodities trading companies.

The move comes as Tether seeks to deploy this year’s record profits and as commodity traders grapple with access to credit.

Tether Discusses Lending Options For Commodity Firms

Commodity trading companies, like Trafigura Group, heavily rely on credit lines from a vast network of lenders. As of March, the company had access to $77 billion in credit lines from about 150 institutions, according to Bloomberg.

However, smaller commodities trading companies often face difficulties in securing the funding they need to operate efficiently.

Tether’s proposition becomes particularly appealing as its funding mechanisms would not be subject to the regulatory requirements imposed by conventional banks. This could result in faster payment processing and more efficient trade execution.

While private credit has started to enter commodity trade finance, Tether claims to have the capital to venture into this space. In its latest financial attestation two months ago, Tether reported a hefty $5.2 billion in profits for the first half of 2024. This attests to the company’s financial strength and capacity for new investments.

In an interview with Bloomberg News, Tether’s CEO Paolo Ardoino said the company is actively exploring opportunities in the commodities sector, though these discussions are still early on in the process. “We are interested in exploring different commodity trading possibilities.”

Russian, Venezuelan Firms Reportedly Use USDT

The traditional model of commodity trade financing involves banks extending a set credit line to traders for acquiring and transporting goods. This practice is usually considered a low-risk business due to the involvement of liquid collateral.

However, new entrants in the commodity finance space have encountered challenges as they navigate a landscape marked by high-profile failures and scandals, Bloomberg notes.

The commodities trading sector has undergone significant shifts in recent times, especially with Russia’s invasion of Ukraine leading to extreme price movements and liquidity strains, highlighting the industry’s dependence on the US dollar.

This has prompted the US government to impose sanctions on the export of natural resources and has reportedly sparked a growing interest in alternative funding methods, such as the use of stablecoins.

At least two major Russian metals producers have started using Tether’s USDT for cross-border transactions, according to the report, while Venezuela’s state-run oil company PDVSA has also adopted the stablecoin for oil shipment payments.

To support its venture into trade finance, Bloomberg said that Tether has formed a dedicated team to identify these opportunities. Tether executives have attended key industry events, such as a commodity finance gathering in Geneva and LME Week in London, to further the firm’s pursuit in this new direction.

Featured image from DALL-E, chart from TradingView.com

The above is the detailed content of Tether (USDT) Issuer Explores Lending Options for Commodity Trading Companies. For more information, please follow other related articles on the PHP Chinese website!