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S&P Global Ratings has issued a harsh assessment of Tether’s USDT, assigning the stablecoin the lowest grade in its rating framework and warning that its resilience is far weaker than its size suggests.
Rather than focusing on short-term price behavior, S&P’s critique centers on what backs USDT – and the agency says that foundation has grown noticeably riskier.
The latest review concludes that Tether has shifted further away from a conservative reserve model and is now carrying exposure to assets that can swing violently in value. Bitcoin, gold, secured loans, and various corporate credit holdings make up a larger share of the collateral backing USDT than in prior years.
S&P’s biggest concern is the Bitcoin portion of reserves. With the cryptocurrency estimated to account for roughly 5.6% of USDT supply, the position now exceeds the issuer’s overcollateralization buffer. In a severe downturn, the agency warns, a rapid drawdown in BTC could push the stablecoin’s backing below par.
The downgrade goes beyond asset composition. S&P again took aim at Tether’s long-standing opacity, arguing that the firm still does not provide enough information on the quality of its custodians, counterparties, or the specifics of how reserve values are calculated. The lack of a formal regulatory framework or ring-fenced customer assets, the rating adds, further weakens investor protections.
Even so, S&P noted that USDT has managed to hold its dollar peg reliably through multiple bouts of crypto turbulence – a point the agency says demonstrates operational strength but does not compensate for the structural weaknesses highlighted in the report.
With the new rating, S&P signals that the world’s largest stablecoin may be more fragile than its market dominance implies, particularly in a scenario where risk assets fall sharply or investor confidence shifts suddenly.