Tether’s Billions in Credit for Commodity Traders: A Subversion of Finance?

Tether, the world’s leading stablecoin issuer for USDT, is exploring the possibility of supplying billions of dollars in commodity loans to traders, a change that could significantly impact an industry that has traditionally relied upon bank credit. According to Bloomberg, Tether has been in negotiations with several commodity traders about opening US dollar loan opportunities and will use its stablecoin for general commodities. Tether’s executives also spoke at two large commodities industry events in Geneva and London in September about the trade finance opportunities. The expansion of Tether into commodities trading credit has been welcomed among some traders as it will not be limited by the same regulatory conditions as traditional loans, potentially speeding up payments and transactions, thus making them more efficient. Tether CEO, Paolo Ardoino did confirm to Bloomberg that such explorations are in progress, although the company is only in the early stages of developing its potential strategy. Despite the possible convenience, there are some risks associated. New investors often face serious challenges entering the field, with riskier traders pursuing returns in difficult parts of the world proving detrimental. There was also a series of high-profile fiascos, failures, fraudulent trades and scandals that reduced confidence in the industry. Additionally, there is also the risk of currency fluctuations as the Russia-Ukraine war resulted in a swing in commodity prices, and dependence on the US dollar for commodities trade may be problematic. At least two of Russia’s top metals producers have already incorporated stablecoins to settle global transactions, while Venezuela’s government-owned company, PDVSA, has increased the use of USDT to pay for oil shipment because of U.S. economic sanctions.

Source