S&P Downgrades Tether to ‘Weak’ as Bitcoin Risks Eclipse Safety Buffer

S&P Global Ratings has downgraded its stability assessment of Tether (USDT) to “weak” (5), the lowest rung on its 1-to-5 scale. The downgrade was triggered by a shift in Tether’s reserve composition, where exposure to volatile assets, specifically Bitcoin, now exceeds the company’s equity buffer.

S&P’s Concerns: Reserves, Risk and Disclosure

S&P’s assessment highlights a critical structural threshold. According to the agency, Bitcoin now accounts for approximately 5.6% of the reserves backing circulating USDT. This figure surpasses Tether’s overcollateralization buffer of 3.9%.

The implication is mechanical rather than sentimental: if Bitcoin prices were to crash, the volatility would consume Tether’s entire equity cushion. This would theoretically leave the stablecoin under-collateralized, with liabilities exceeding assets, unless Tether injected external capital.

Related: Tether’s Expanding Gold Position Gains Global Attention as Holdings Reach 116 Tons

S&P noted that while Tether holds over $113 billion in U.S. Treasuries, the presence of $9.9 billion in Bitcoin and $12.9 billion in gold (roughly 13% of total reserves) introduces volatility that is incompatible with a “stable” rating under S&P’s criteria.

Tether CEO Pushes Back

Ardoino argued that traditional finance is uncomfortable with companies that operate outside its system. He said Tether remains overcapitalized, holds no toxic assets, and continues to post strong profits.

Ardoino also added that the downgrade was resistance from a sector that struggles with Tether’s independent business model.

Related: Tether (USDT) Implicated in Russian War Funding Linked to UK Political Donor

China’s Shadow Crypto Market Feels the Shock

The downgrade caused immediate concern across China’s vast shadow crypto market, where more than 20 million traders rely on USDT to access digital assets.

Reactions were mixed.

Some traders argued that negative news about Tether appears often without real consequences, while others worried that any disruption to USDT could cause serious issues in a market that already operates with little regulatory backing.

Chinese traders depend on USDT to move capital through overseas exchanges, OTC desks and private channels, bypassing strict national bans. The heavy reliance on USDT explains why the downgrade triggered anxiety across the region.

Tether Diversification vs. Distraction

Despite the ratings dispute, Tether is aggressively diversifying its balance sheet away from pure stablecoin operations. Tether has deployed over $1.5 billion into commodity‑trade lending and now supports agricultural shipments, oil cargoes and other supply‑chain operations.

Ardoino said the firm plans to scale this business massively.Reports also suggest Tether is exploring a $1.15 billion investment in German robotics startup Neura. If the deal materializes, it would add to the 140 companies Tether is backing across sectors such as AI, robotics, mining, energy and sports.