Tether Plans Major Expansion in Commodity Lending Market

Tether Holdings SA, a prominent player in the stablecoin market, is set to significantly expand its lending operations within the commodities sector. Chief Executive Officer Paolo Ardoino announced that the company has already extended approximately $1.5 billion in credit to commodities traders and intends to increase this amount dramatically. The El Salvador-based firm plans to finance trading in various commodities, including oil, cotton, and wheat.

Ardoino highlighted that Tether has provided loans in both US dollars and its own stablecoin, USDT, which is pegged to the US dollar. Despite currently being a minor entity compared to the major banks involved in commodities lending, Tether’s substantial reserves, which total nearly $200 billion, position it well to compete in this arena. The CEO noted that the growing acceptance of USDT in commodity-exporting regions, particularly in Latin America, enhances the firm’s lending potential.

Strategic Lending in a Shifting Market

The commodities industry heavily relies on credit, with traditional banking lines facilitating payments for the trillions of dollars worth of goods traded worldwide. Although most loans are denominated in US dollars, some firms may be hesitant to borrow in USDT due to the established norms in the sector. Tether’s foray into commodities finance follows a period during which many traditional banks reduced their exposure to this market, prompted by various financial setbacks and fraud allegations.

Major trading companies such as Trafigura and Cargill still have access to extensive lending resources, but smaller firms often face challenges in securing financing. This has created a growing demand for alternative credit sources, particularly in riskier regions where banks are more reluctant to lend. Private lenders typically charge higher interest rates to account for the increased risk, making the commodities finance landscape both challenging and lucrative.

Tether’s commodities lending initiative is part of its broader Trade Finance unit, launched in 2022. This division operates independently of the reserves backing its stablecoins. The potential for rapid loan turnover in commodities finance appeals to Tether, as credit lines are frequently utilized and replenished within short timeframes. For instance, shipments of essential goods like wheat or oil often complete their journeys in under a month.

Growth Beyond Lending

The expansion into commodities lending coincides with a broader surge in the demand for stablecoins globally. These digital currencies, typically pegged to fiat currencies like the US dollar, are increasingly being adopted for various transactions, including remittances and payments. Legislative developments in the United States, particularly a bill passed in July, have further catalyzed this trend.

Currently, USDT dominates the stablecoin market, with a circulating supply nearing $184 billion. Tether’s business model relies on backing all issued coins with liquid assets, such as US Treasury Bills, allowing the company to generate substantial interest revenue. Ardoino has projected a profit of approximately $15 billion for 2025, although Tether’s financial results are not subject to external audits.

Beyond lending, Tether is expanding its operations in commodities, particularly precious metals. Recent reports indicate the firm has accumulated one of the largest gold reserves outside of banks and nation-states. Furthermore, Tether is reportedly adding senior precious metals traders from HSBC Holdings Plc to enhance its expertise in this area.

In March, Tether announced plans to invest up to $616 million to increase its stake in Adecoagro SA, a firm engaged in agricultural and energy production in South America, raising its ownership to 70%. This strategic move reflects Tether’s commitment to diversifying its interests and enhancing its footprint in the commodities market.

The company’s aggressive expansion strategy illustrates its intent to capitalize on the evolving landscape of commodities finance, positioning Tether as a significant contender in a sector that is undergoing substantial transformation.