S&P Gives Tether’s USDT Its Worst Rating as Bitcoin Holdings Exceed Safety Margin

TLDR

• S&P Global Ratings downgraded Tether’s USDT to its lowest stability rating of 5 (weak) on November 26, 2025
• Bitcoin now represents 5.6% of USDT reserves, exceeding the 3.9% overcollateralization margin, raising concerns about potential undercollateralization
• Tether holds 75-77% of reserves in US Treasuries and short-term instruments, but also includes higher-risk assets like gold, corporate bonds, and $14 billion in secured loans
• Tether rejected the report as “misleading” and argued it fails to capture the resilience of digitally native money
• USDT remains the largest stablecoin with over $180 billion market cap and has maintained its dollar peg through recent market cycles

S&P Global Ratings downgraded Tether’s USDT stablecoin to its lowest possible stability score on November 26, 2025. The rating agency moved USDT from a 4 (constrained) to a 5 (weak) on its stablecoin stability scale.

The downgrade focused on increasing exposure to volatile assets. Bitcoin now accounts for 5.6% of USDT’s total reserves.

This percentage exceeds USDT’s 3.9% overcollateralization margin. S&P warned that a drop in bitcoin prices could leave the stablecoin undercollateralized.

The ratings agency examined Tether’s reserve composition. US Treasuries and cash-like assets make up 75-77% of the backing.

However, USDT also holds higher-risk investments. These include gold, corporate bonds, and secured loans worth over $14 billion as of September 2025.

Tether Disputes Rating Agency Assessment

CEO Paolo Ardoino criticized traditional rating models. He pointed out that rating agencies previously gave high scores to companies that later collapsed.

Tether emphasized its transparency and global utility. The company argued that S&P’s framework doesn’t capture the nature of digitally native money.

Reserve Composition Raises Questions

S&P cited concerns about reserve disclosure gaps. The agency noted limited public reporting on asset valuations.

Questions remain about the creditworthiness of banks and custodians. These institutions hold Tether’s reserve assets.

Secured loans still represent 8% of reserves. Tether previously stated it would phase out these loans by the end of 2023.

The reserves include various corporate bonds. These assets carry different levels of credit and market risk.

USDT is headquartered in El Salvador. The country’s National Commission of Digital Assets has looser requirements for stablecoin reserves than other jurisdictions.

Despite the weak rating, USDT maintains its dollar peg. The stablecoin has weathered multiple crypto market downturns in recent years.

USDT remains the largest stablecoin with a market cap exceeding $180 billion. It plays a central role in global crypto markets, particularly in emerging economies with limited dollar access.

Tether holds over $112 billion in US Treasuries. This makes it the 17th largest holder of US government securities worldwide, surpassing countries like South Korea and Germany.

The company also accumulated 116 tons of gold in reserves. This rivals the holdings of some nation-states and central banks.

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