Tether seeks to enter the commodity trading market

Tether Holdings, the issuer of the stablecoin USDT, is considering providing loans to commodity trading firms and is currently in the “early stages” of this initiative.

In an interview with Bloomberg, Tether’s CEO, Paolo Ardoino, confirmed that Tether is discussing USD loan services with several companies.

Ardoino explained, “It’s highly likely that we won’t disclose how much we will invest in commodity trading, as we are still in the process of formulating our strategy.”

He also emphasized that there will be “vast opportunities” in the future, adding that Tether is interested in exploring various possibilities for commodity trading.

While the role of cryptocurrency in commodity trading is still evolving, it has the potential to greatly improve transparency, security, and efficiency, thereby revolutionizing the industry.

Large companies have access to extensive credit networks for financing commodity trades, whereas smaller firms often struggle to secure funding. For instance, the giant commodity trading firm Trafigura Group has a vast credit network with around 150 financial institutions and a $77 billion credit line.

According to industry sources, Tether’s proposal aims to simplify and accelerate payments and transactions, potentially bypassing the strict regulatory conditions that traditional lending institutions must comply with.

Tether explores new horizons

Tether has noted that it possesses the capital to participate in the sector and reported an enormous profit of $5.2 billion in the first half of 2024.

Additionally, its own stablecoin, USDT, continues to experience stable growth, maintaining its dominant position in the stablecoin sector. USDT’s market capitalization is nearing $120 billion, marking a new all-time high for the token.

This stablecoin has also gained attention as a cross-border transaction medium in Russia and Venezuela. According to Bloomberg, at least two major Russian metal manufacturers have begun settling transactions with customers using USDT.

The commodity trading industry has experienced significant volatility and stagnation following Russia’s invasion of Ukraine, creating liquidity constraints while generating record profits.

The Russia-Ukraine war has underscored the reliance on the US dollar, as the U.S. government imposed economic sanctions via the dollar. As a result, the use of stablecoins as an unregulated financial instrument has increased.

To capture the growing demand and this trend, Tether has hired a team to explore trade finance opportunities.

Additionally, as announced in March, Tether is focusing on expanding into the artificial intelligence (AI) sector.