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S&P Global Ratings cut Tether’s USDT stablecoin stability score to its lowest level and triggered a direct clash with the issuer over reserve quality and transparency. The agency now rates USDT as 'vulnerable' on a five-point scale.
Analysts at S&P say Tether’s reserve mix explains the downgrade. The report highlights growing exposure to what the agency labels higher-risk assets, including Bitcoin, gold, secured loans and corporate debt. S&P estimates that Bitcoin alone accounts for about 5.6% of USDT backing, a share that exceeds the reported overcollateralization buffer.
S&P also points to disclosure gaps around non-cash assets and counterparties. The agency acknowledges that short-term United States Treasurys and cash equivalents still represent most reserves, but it wants more detail on the remaining portfolio. S&P notes that Tether operates under El Salvador’s digital asset rules, which it views as less demanding than frameworks in larger financial centres.
The downgrade places USDT in the same stability bucket as other stablecoins that hold riskier collateral or publish fewer disclosures. S&P warns that a sharp fall in Bitcoin, precious metals or risk assets could weaken reserve coverage if market stress coincides with heavy redemptions. The agency says clearer reports and tighter limits on volatile holdings could support a stronger assessment in future reviews.
Tether reports that assets exceed liabilities and stresses that it maintains an overcollateralized position. Quarterly attestations from BDO Italia show large holdings of Treasury bills, money market instruments and cash deposits. The company also holds positions in gold, Bitcoin and other investments, which it describes as part of a diversification strategy.
Tether chief executive Paolo Ardoino rejected the new rating in a series of posts on X. He argues that traditional ratings models suit banks and legacy finance, not issuers of digital tokens. Ardoino says those models failed to prevent past collapses of highly rated institutions and do not capture Tether’s structure.
He describes Tether as an overcapitalized company that operates without toxic assets and continues to generate strong profits. Ardoino also claims that the downgrade reflects discomfort within traditional finance about the growth of a large dollar stablecoin outside the banking system. S&P has not changed its methodology in response and continues to focus on reserve composition, governance and transparency metrics.
USDT remains the largest United States dollar stablecoin in circulation. The token represents more than half of global stablecoin capitalization and records monthly volumes above those of many competitors. Many exchanges and traders use USDT as a primary quote asset for crypto markets.
Market data shows limited redemption pressure after the rating action. Blockchain analytics firms report no major outflows from exchanges or on-chain wallets linked to USDT since the downgrade. Observers now watch whether regulators and institutional users treat the S&P decision as a signal to tighten oversight or adjust risk controls around stablecoin exposure.
