TL;DR
- Tether invests $1.5 billion to finance oil and agricultural commodities.
- The firm competes with major banks by lending USDT and cash.
- Tether fills a lending gap left by traditional risk-averse financial institutions.
Tether is targeting growth in commodities finance. The firm has invested around $1.5 billion to support traders handling oil, cotton, wheat, and other agricultural goods.
The initiative aims to increase lending in both traditional dollars and USDT, the stablecoin pegged to the U.S. dollar. CEO Paolo Ardoino stated that the company plans to expand operations dramatically, using its nearly $200 billion in reserves to compete with the large banks that have traditionally dominated this market.
Ardoino noted that using USDT helps facilitate lending in regions such as Latin America, where much of the world’s commodities are produced. Loans are essential in commodities trading, as banks usually fund the purchase and transport of food, metals, oil, and gas worth trillions of dollars globally.
Trade Finance: A Separate Unit for Commodities
Commodities lending operates through Tether’s Trade Finance division, launched last year. This operation runs independently from the reserves that back its stablecoins. Since October, Tether has held discussions with companies in the sector about lending opportunities.
Tether is entering a market where traditional banks have reduced their participation after fraud cases and company failures. Major trading houses like Trafigura and Cargill still secure credit easily, but smaller firms struggle to access funds, limiting their business.
This gap has created space for private lenders willing to take risks in areas where banks avoid operating. These lenders typically charge interest rates above 10%, offsetting the additional risk.
For Tether and other private lenders, commodities loans provide fast and steady interest flows, as a typical international shipment of wheat or oil takes less than a month from start to finish.
Stablecoin Drives Diversification
Tether’s expansion into lending, artificial intelligence, and sports coincides with growing global adoption of stablecoins. Recent U.S. legislation covering stablecoins has also accelerated adoption.
Through this approach, Tether aims to strengthen its role not only as a stablecoin issuer but as a key player in commodities financing, leveraging liquidity, digital market experience, and growing trust in USDT to provide fast and efficient solutions.
