Bitrabo Editorial
Tether Holdings, the creator of the largest stablecoin, USDT, is looking into lending options to commodity trading firms as it seeks new avenues to utilize this year’s profits amid a recovering market.
As reported by Bloomberg, Tether is in talks regarding potential US dollar lending options with various companies in the commodities industry, which often face challenges in securing credit.
New Lending Options for Commodity Traders
Companies in the commodity trading sector, like Trafigura Group, rely significantly on credit lines, boasting $77 billion across about 150 lenders as of March, according to Bloomberg. In contrast, smaller trading firms often find it tough to access the funding necessary for seamless operations.
Tether’s proposal is attractive since its funding processes would not be hindered by the regulatory requirements typical of traditional banks. This could enhance payment speeds and improve trade execution efficiency.
While private credit is making modest gains in commodity trade finance, Tether maintains it has the capital to enter this sector. Their recent financial report indicated impressive earnings of $5.2 billion for the first half of 2024, reflecting their strong financial position and investment potential.
In an interview with Bloomberg News, CEO Paolo Ardoino confirmed the company is investigating chances in the commodities field, though he mentioned these discussions are still in preliminary phases. “We are interested in exploring different commodity trading possibilities,” he stated.
Tether Used by Firms in Russia and Venezuela
The standard model for financing commodity trades usually sees banks setting a credit limit for traders to source and transport goods. This method is generally considered to be low-risk due to the liquid assets involved.
However, Bloomberg also notes that new players in the commodity financing sphere have encountered obstacles, particularly amid a backdrop of notable failures and controversies.
The commodity trading industry has undergone considerable turbulence in recent years, especially following Russia’s invasion of Ukraine, which resulted in erratic price changes and liquidity constraints, underscoring the sector’s reliance on the US dollar.
Consequently, the US government has imposed sanctions on natural resource exports, reportedly spurring interest in alternative financing approaches, including stablecoins.
Notably, the report mentions that at least two major Russian metals producers have started using Tether’s USDT for international transactions, while Venezuela’s state oil company, PDVSA, has incorporated the stablecoin for oil shipment payments.
To facilitate its entry into trade finance, Tether has formed a specialized team to evaluate potential opportunities. The company’s executives have participated in significant industry events, such as a commodity finance gathering in Geneva and LME Week in London, further demonstrating their commitment to this new venture.
Image sourced from DALL-E, with a chart from TradingView.com