Tether Becomes Major Precious-Metals Financier, Providing $1.45 Billion to US Dealer GoldExchange.com

Tether, the issuer of the world’s largest dollar stablecoin USDT, has provided $1.45 billion in financing to a major US precious-metals dealer.

Bloomberg reported on Sept. 17 that GoldExchange.com owed Tether $1.45 billion in payables and advances as of the end of June. The amount accounted for most of GoldExchange.com’s total precious-metals lease balance of $1.7 billion.

The arrangement differs from a standard cash loan. Tether lends physical gold from its reserves, which GoldExchange.com then uses in its business. At maturity, the dealer returns the same quantity and purity of gold and pays a lease fee.

A $100 million gold lease agreement Tether signed with GoldExchange.com in February carried an annual rate of 1.75%. That was well below the roughly 6% cost of bank credit available to GoldExchange.com at the time.

GoldExchange.com’s precious-metals lease and advance balance tied to Tether rose to $1.45 billion at the end of June from $360 million at the end of March, nearly quadrupling in three months. Greg Roberts, the company’s chief executive officer, recently described the transactions with Tether as “an opportunity to secure liquidity more cheaply than dollar-denominated credit lines.”

Tether is using the deals to turn physical gold held as reserve assets into income-generating assets. Bloomberg reported that the company held more than 146 metric tons of physical gold as of the end of June, worth about $20 billion at current prices.

Bloomberg also reported that Tether had discussed financing with Switzerland’s refining industry as it seeks to expand its gold-leasing business. The move suggests Tether is extending its reach into the precious-metals finance market by using gold held in its reserves.