Tether, the world’s largest stablecoin issuer, has launched a $400mn private credit fund as it seeks to boost the use of its dollar-linked cryptocurrency. The company said on Wednesday it was creating the vehicle, dubbed Stable Fund, with London-based digital asset investor Fasanara Capital and is targeting up to $3bn in third-party capital. It marks the latest effort by Tether to expand the use of its dollar-linked stablecoin USDT, which is the reserve currency of the digital asset market but whose market capitalisation of $183bn has been flat this year.

The El Salvador-based company has a wide-ranging strategy and eccentric venture capital portfolio, and has invested in or runs businesses including commodities finance, gold mining, robotics, messaging apps and Italian football club Juventus. Tether said the private credit fund would focus on small and medium-sized businesses “targeting borrowers that conventional funding channels have historically underserved”.

The company’s move into private credit comes as the market is facing its biggest challenge in almost a decade. Traditional private credit funds are writing down their portfolios, facing defaults and outflows, as the value of troubled loans rises this year. Stablecoin-backed private credit is an even riskier and more niche market. Tether said it would be “sourcing USDT-linked financing opportunities”, providing the stablecoin settlement infrastructure and ability for borrowers to connect between tokens and sovereign currencies. Fasanara, which has $6bn in assets under management, would work to bring in and underwrite the deals, it said.

Tether’s USDT token is pegged to the US dollar and the company’s purchases of US Treasuries have made it a bridge between the global financial system and the volatile world of cryptocurrency. The company has for years faced scrutiny over the quality of the reserves backing its stablecoin and last month said KPMG conducted a full audit of its financial statements for the first time. Last year, Tether sought to raise up to $20bn in a deal that would value it at as much as $500bn, making it one of the most valuable private companies in the world.