Tether eyes USD lending for commodities, disrupting traditional bank credit and boosting stablecoin use in global trade.
Tether's lending plans could address credit gaps in volatile commodities markets, offering alternatives to bank financing.
Stablecoins like USDt, backed by dollar assets, are becoming key tools in cross-border commodities trading and financial strategies.
The $USDT issuer, Tether, is considering lending money to commodities trading companies in US dollars, which might upend established bank credit arrangements. Tether Holdings Ltd. is looking into this potential to deploy its profits, which hit $5.2 billion in the first half of 2024, according to a Bloomberg story dated October 14. This investigation is being conducted as credit-dependent commodities merchants deal with a changing market environment.
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With the intention of becoming more involved in the global commodities trade, Tether is allegedly in talks with a number of commodity trading companies about lending opportunities. These businesses mostly rely on loans to fund the export of metals, oil, and other commodities. Additionally, dealers in derivatives who deal in futures and swaps rely on credit to control risk and leverage trades.
Potential Market Disruption
The commodity trading sector has faced volatility, especially after Russia’s invasion of Ukraine, leading to liquidity challenges. Tether’s entry into this sector could change the dynamics, offering an alternative to traditional credit systems, which are often vulnerable to global geopolitical events. Hence, Tether's plan could fill the financing gap in a market already seeking alternative solutions.
Moreover, Tether’s USD lending option could increase the use of stablecoins in commodity trading. More people are viewing stablecoins like USDt—backed 1:1 by liquid assets denominated in dollars—as a competitive alternative for cross-border transactions. This trend is a continuation of Ripple's recent strides in stablecoin development.
Tether's Growth and Future Plans
In addition to the USD lending discussions, Tether has diversified its investments into sectors such as sustainable energy, Bitcoin mining, and artificial intelligence. These moves reflect Tether's broader ambitions beyond the stablecoin market.
Tether's CEO, Paolo Ardoino, noted that the company is just beginning to explore commodities trading. He indicated interest in a number of commodity trading opportunities, but he withheld precise investment amounts.
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