S&P Global Ratings Downgrades USDT Stability Rating to the Minimum Level

• The agency questioned the quality of the stablecoin’s reserves.
• Tether called S&P’s conclusions “misleading”.
• The company points to the scale of reserves and the stability of USDT.

The agency S&P Global Ratings downgraded the stability rating of USDT to the lowest level of its scale. Experts questioned the ability of the stablecoin to maintain a peg to the dollar.

The report said that the collateral model includes assets with increased volatility, and the audit of reserves remains limited. Tether rejected the agency’s findings and said they misrepresented the reality of the situation.

S&P pointed out that some of the USDT’s collateralization comes from riskier assets such as bitcoin, gold, corporate bonds and loans. The agency cited a calculation that bitcoin accounts for 5.6% of USDT in circulation for a total collateralization ratio of 103.9%.

A fall in the price of the cryptocurrency or the value of other higher-risk assets “could lead to a lower collateral ratio,” it said.

Analysts also pointed to Tether’s regulation in El Salvador, which is overseen by the National Commission for Digital Assets, which applies more lenient reserve asset requirements. Lack of regular audits was cited as another factor affecting the rating.

Meanwhile, S&P noted that about 75% of the collateral is in U.S. Treasuries and other short-term, low-risk instruments.

The company called the report “misleading.” According to its representatives, the firm “categorically fails to match the characterization presented in the analysis.” The document does not reflect the real indicators of the sustainability of USDT, the issuer of the stablecoin is confident.

Tether CEO Paolo Ardoino said that classical rating models have traditionally supported companies that failed despite high valuations.

The report came amid growth in the stablecoin sector following the approval of the Genius Act in the U.S. and an increase in total market capitalization above $300 billion. Tether noted that the company ranks 17th among holders of U.S. Treasury securities, holding more than $112 billion in short-term bonds.

Separately, analysts have noted Tether’s growing gold reserves. The company has accumulated 116 tons of the metal, a volume comparable to the reserves of Hungary and South Korea.

Combined with a large portfolio of government bonds and the ability to quickly issue and redeem USDT, this has sparked discussions that Tether is actually performing functions close to those of a central bank.

Recall, we wrote that Tether entered the market of loans secured by bitcoin with investments in Ledn.