[NEWS] Tether considers lending billions to commodity futures traders

Tether, the world's largest stablecoin issuer, is considering lending to commodity traders as it looks for ways to invest its billions of dollars in profits, Bloomberg reported.

Tether has reportedly spoken to several commodity trading companies about the possibility of lending in U.S. dollars. The talks also explored the possibility of Tether getting involved in commodity trading. Commodity traders rely heavily on credit to finance the transport of government bonds for commodities such as oil and gold.

Tether's move could shake up an industry that typically relies on traditional banks for credit. Tether has discussed U.S. dollar lending opportunities with several companies in industries that need credit, people familiar with the matter told Bloomberg on condition of anonymity.

Tether's meetings with traders also discussed how USDT, already used as a way for traders and producers to get around the dollar in countries under multiple U.S. sanctions, such as Venezuela and Russia, could be used in more mainstream commodity trading.

Credit lines are a lifeline for commodity trading companies that ship millions of dollars' worth of oil, metals and beverage cargoes around the world. The industry's giants have vast networks of lenders they can tap into. One example is the major Trafigura Group, which had $77 billion in credit lines with about 150 institutions as of the end of March. Smaller companies are struggling to get the capital they need to keep moving cargo.

Tether's proposal is particularly attractive because "the company's financing is not bound by the same strict regulatory conditions as traditional lenders and could potentially speed up payments and transactions. Private credit is making inroads in commodity trade finance, and Tether, which does not file audited financial statements, has the capital it needs to participate," the person said.

In its most recent financial statements, released in July, Tether reported profits of $5.2 billion for the first half of 2024.

Tether CEO also acknowledges commodity participation

In an interview with Bloomberg News, Tether CEO Paolo Ardoino acknowledged that the company is exploring opportunities in commodities, saying, "It's still early stage considerations."

"I probably won't disclose how much we're going to invest in commodities trading. We're still working out our strategy. We're interested in exploring different commodity trading possibilities. We believe the opportunities in this space are very large in the future," he said.

In most commodity trade finance, banks give merchants a certain amount of credit against the purchase and shipment of goods. Lending against commodities is one of the oldest activities for traditional banks, as it has long been a relatively safe investment with highly liquid collateral.

Tether has hired a team to research and develop trade finance. Some of its executives attended two industry conferences in September, a commodity finance industry event in Geneva and LME Week in London.

Reference: Bloomberg
Image: Shutterstock

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