Tether plans major expansion in commodities lending, deploys $1.5 billion capital

The company behind the world’s biggest stablecoin is making a big bet on commodities lending, with plans to grow its operations after putting about $1.5 billion into the sector.

Tether Holdings SA, based in El Salvador, wants to increase its financing for traders who deal in oil, cotton, wheat and other farm goods, according to CEO Paolo Ardoino. The company has been giving out loans in both regular US dollars and its USDT stablecoin, which tracks the value of the dollar.

“We are going to expand dramatically,” Ardoino said, as reported by Bloomberg. “The team is super bullish.”

Right now, Tether is much smaller than the big banks that normally lend to commodities traders. But the company makes huge amounts of money from its nearly $200 billion in reserves, giving it plenty of cash to compete. Using USDT for loans also helps, since the digital currency is catching on in places like Latin America, where many commodities come from, Ardoino explained.

Loans are essential in the commodities business. Banks typically provide the money needed to buy and move the trillions of dollars worth of food, metals, oil and gas that traders ship across the globe.

However, Tether might run into some resistance. Most commodities loans use US dollars, so some companies may be wary about borrowing in USDT instead.

New trade finance unit operates separately

The commodities lending work is handled by Tether’s Trade Finance division, which started last year. This operation runs separately from the reserves that support its stablecoins. Last October, news emerged that Tether had begun talking with companies in the sector about lending opportunities.

Tether is entering this market several years after regular banks started backing away from commodities lending. A string of company failures and fraud cases spooked many lenders. While major trading houses like Trafigura and Cargill can still get plenty of credit, smaller firms struggle to find funds, which limits how much business they can do.

This has created room for private lenders to step in, especially for deals in riskier places where banks don’t want to operate. These lenders usually charge interest rates above 10% to make up for taking on more risk.

For Tether and other private lenders, commodities lending has an appealing feature: credit lines get used over and over again quickly, so interest payments come in fast and steady. A typical international shipment of wheat or oil takes less than a month from start to finish.

Stablecoin boom fuels diversification push

Tether’s push into different areas, including lending, artificial intelligence and sports, is happening as stablecoins become more popular worldwide. These digital tokens, usually tied to regular currencies like the dollar, are being used more for money transfers and payments. US legislation passed in July that covers stablecoins has helped speed up this trend.

USDT dominates the stablecoin market with almost $184 billion currently in use. Since Tether must keep reserves of liquid assets like US Treasury bills to back every coin, it earns billions each year in interest. As reported by Cryptopolitan last month, Ardoino said he thinks the company will make about $15 billion in profit for 2025. The company doesn’t have its financial reports audited.

Tether has been building up its commodities business beyond just lending. The company now holds one of the biggest stockpiles of gold in the world outside of banks and governments. This week, reports came out that Tether is hiring two top precious metals traders from HSBC Holdings Plc.

The company’s gold-backed stablecoin is currently worth almost $2.2 billion, according to CoinGecko data.

In March, Tether announced it would pay up to $616 million to increase its ownership in Adecoagro SA, a South American company that handles farming and energy production, to 70%. In April, Adecoagro brought Kyril Louis-Dreyfus, who comes from a well-known commodities trading family, onto its board.

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