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The USDT issuer needs ways to deploy billions of dollars in profits, and commodity traders could benefit from expanded credit.
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Tether Holdings Ltd is considering lending to commodities trading companies as the stablecoin issuer looks to deploy billions of dollars in profits, according to an Oct. 14 report by Bloomberg.
Tether, which mints USDT, has discussed United States dollar-denominated lending opportunities with several commodity trading firms, Bloomberg said, citing people familiar with the matter who asked not to be identified.
Tether did not immediately respond to Cointelegraph’s request for comment.
Related: Tether reports record-breaking $5.2B profit in first half of 2024
In those discussions, the stablecoin issuer also reportedly explored the potential for Tether (USDT) to play a role in mainstream commodities trades.
Commodity traders rely heavily on credit to finance international shipments of commodities such as oil and precious metals.
Firms specializing in commodities derivatives — such as futures or swaps — also rely on credit to finance trades. Futures tied to spot cryptocurrency prices are surging in popularity.
Source: CME Group
Futures contracts are standardized agreements to buy or sell an underlying asset at a future date. They play a critical role in hedging strategies for institutional investors. Futures are also popular for speculation because they allow traders to double down on directional bets with leverage.
Nearly $290 billion in customer funds reside with brokerages that specialize in futures and options trading, according to a September report filed by the US Commodities Futures Trading Commission (CFTC).
Futures positions are usually financed primarily by leverage, with only a portion of each contract’s value paid for in advance with collateral, or “margin,” posted by traders.
According to a July 31 announcement, Tether reported record-breaking profits of $5.2 billion in the first half of 2024 and a larger-than-ever stockpile of United States government bonds.
The growth reflects the ongoing proliferation of the USDT stablecoin, which Tether says is backed 1:1 with liquid US dollar-denominated assets. The figures are based on an attestation by BDO, an independent accounting firm.
Source: CoinMarketCap
The market capitalization of USDT stands at approximately $120 billion as of Oct. 14, according to CoinMarketCap.
Tether said it has been reinvesting a portion of its profits in adjacent industries, including sustainable energy, Bitcoin mining, data, AI infrastructure, peer-to-peer telecommunications technology, neurotech, and education.
In an interview with Bloomberg, Tether’s CEO, Paolo Ardoino, said the company is exploring opportunities in commodities, noting they are still “in early stages.”
“We likely are not going to disclose how much we intend to invest in commodity trading. We are still defining the strategy,” Ardoino told Bloomberg.
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This article first appeared at Cointelegraph.com News
