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Crypto Journalist
Anas Hassan
Crypto Journalist
Anas Hassan
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Stablecoin issuer Tether is positioning itself to compete with banks in commodity trading loans after deploying about $1.5 billion in market credit, according to a Bloomberg report.
Tether’s CEO, Paolo Ardoino, revealed on November 14 that the firm intends to expand its lending activities to various commodity markets, from oil and cotton to wheat and various agricultural products.
The company has provided loans in two American dollars and his USDT stablecoinwhich is backed by US Treasury bonds and precious metals such as gold.
While Tether remains a minority player compared to the most active banks in commodity lending, the income it generates from its nearly $200 billion in reserves gives the company significant firepower to compete.
Last October, Cryptonews covered Tether’s preliminary conversations with several companies regarding dollar-denominated loan companies.
At the time, Ardoino noted: “We are unlikely to publicly share specific investment figures for commodity trading. Our strategy is still in shape.”
He emphasized that the future prospects are “huge,” with Tether keen to pursue various opportunities in commodity markets.
The current commodity lending model
A commodity trade loan is essentially a short-term credit that helps commodity producers, traders and buyers manage the time and costs associated with buying, transporting and selling physical goods.
Banks have historically fulfilled this role by helping merchants manage cash flow gaps between upstream payments to suppliers and downstream collections from customers.
However, the process tends to be heavy and time-consuming documentation, although banks bring decades of operational expertise, regulatory frameworks, and a long-term partnership with large commodity companies.
How Tether’s Approach Differs
Tether’s lending model operates in a simpler and faster way; instead of relying solely on bank lines or letters of credit, it lends either US dollars or USDT directly to commodity traders.
Because USDT transfers settle near instantly across borders, it is already widely used in emerging markets, especially in commodity exporting regions.
Tether can offer faster access to working capital when traders need liquidity the most.
Where Tether could also rival banks is in speed of establishment and access to liquidity in markets where traditional financing is slow or expensive.
A trader who might wait days for a bank to process a loan or verify documents could receive funds in minutes via USDT, allowing them to move cargo or secure a shipment before prices change.
Tether’s financial push for commodities comes several years after traditional banks reduced their exposure to this sector following several high-profile failures and fraud allegations that damaged lenders’ confidence.
This has led to a growing market for private credit, particularly for financing business in riskier locations where banks are less willing to lend.
For Tether and other private lenders, commodity finance is also attractive because credit facilities are typically cyclical for multiple uses in compressed time frames, generating frequent and consistent interest payments.
The financial situation of Tether
Tether seems unstoppable right now, with the world’s largest stablecoin issuer on track to spawn about $15 billion this year.
Bitwise’s chief investment officer, Matt Houga, recently expected that Tether could become the most profitable company in the world, potentially surpassing Saudi Aramco.
It is the third largest digital asset in the world with a market capitalization of $183.8 billion, up more than 50% compared to this time last year.
Although Tether maintains strong cash reserves, recent reports suggest that the company may seeking $20 billion in new capital for a 3% ownership stake.
Such a transaction would establish a valuation close to $500 billion, eclipsing Netflix and Samsung while approaching iconic financial services brands like Mastercard.
The company has simultaneously expanded its precious metals holdings, with its gold reserves currently exceeding $12 billion.
To support this expansion, Tether recently brought on board leadership from HSBC’s metals division to strengthen its bullion infrastructure.
