Author: Clow Produced by: Plain Language Blockchain Tether (USDT), with a market capitalization of $184 billion, is the cornerstone of liquidity in the crypto market, with daily trading volume often exceeding the combined volume of Bitcoin and Ethereum. However, this digital dollar empire is facing an unprecedented triple crisis. In the fourth quarter of 2025, Standard & Poor's downgraded its rating to the lowest "weak" level; BitMEX founder Arthur Hayes warned that a 30% drop in gold and Bitcoin holdings would lead to its bankruptcy; the United Nations and consumer organizations accused USDT of becoming the preferred tool for fraud, money laundering networks and sanctioned entities in Southeast Asia. Is Tether an impregnable fortress or a crumbling giant? 01. S&P issues death sentence In November 2025, S&P lowered Tether's rating from "4 (restricted)" to "5 (weak)"—the lowest possible rating in the rating system. For institutional investors subject to strict compliance restrictions, holding "weak" rated assets is tantamount to suicide on the board of directors. S&P's reasoning is straightforward: Tether is aggressively increasing its holdings of high-risk assets. The data doesn't lie. According to the Q3 2025 audit report, the proportion of high-risk assets surged from 17% to 24%. For every $100 USDT, $24 is staked in Bitcoin, gold, mystery loans, and "other investments." Bitcoin: $9.85 billion Gold and other precious metals: $12.9 billion Guaranteed loans: US$14.6 billion Other investments: $3.9 billion Key data: Tether has an equity buffer of approximately $6.8 billion, while its Bitcoin holdings exceed that figure. "If the price of Bitcoin falls sharply, coupled with the depreciation of other high-risk assets, Tether's reserve coverage ratio will fall below 100%," S&P wrote bluntly. In contrast, Circle (USDC) received a “strong” rating because it is almost entirely backed by U.S. Treasury bonds and bank deposits. Tether is more like an aggressive macro hedge fund, earning interest on US Treasury bonds while investing the profits in Bitcoin and gold, betting on the long-term depreciation of the US dollar. Tether CEO Paolo Ardoino responded defiantly: "We wear your loathing with pride." He has the confidence: Tether holds over $100 billion in U.S. Treasury bonds with an annualized yield of 4-5%, earning billions of dollars annually without lifting a finger. Which traditional bank doesn't operate with high leverage? Tether, at least, has full reserves. But the market won't change its rules just because of stubbornness. S&P's downgrade has already crossed out institutional investors' compliance checklist. 02. A Trader's Doomsday Prediction Arthur Hayes did the math for Tether—it was simple to the point of being brutal. The logic is based on a primary school formula: Equity = Total Assets - Total Liabilities According to Tether's Q3 2025 data report released by accounting firm BDO: Total assets: US$181.2 billion Total liabilities: US$174.4 billion Equity buffer: $6.8 billion Hayes has its sights set on “dangerous goods” on the asset side: $22.8 billion worth of Bitcoin and gold. Stress test: If the price drops by 30% simultaneously, Tether will lose $22.8 billion × 30% = $6.84 billion, which would wipe out its entire equity. 30% is not an extreme assumption. On March 12, 2020, Bitcoin plummeted by 40%, and in 2022, LUNA crashed, dropping by 35%. In the crypto market, this is a very real possibility. But the counterattack came quickly. Former Citi analyst Joseph Ayoub points out that Hayes overlooked a crucial point: Tether has a money-printing machine. With $135 billion in US Treasury bonds and an annualized return of 4%, that means earning $450 million per month passively. Even if there's a $6.8 billion paper loss, it can be covered in 15 months. The prerequisite is: avoid a massive bank run. More importantly, Tether has $140 billion in liquid assets. Even if it faces $50 billion in redemptions (far exceeding the scale of the FTX collapse), it can cope by selling US Treasury bonds, without having to sell Bitcoin at a low price. As long as the market doesn't experience a simultaneous crash and run on funds, Tether can weather the storm. But crises often come in pairs. This is how Lehman Brothers collapsed in 2008: a market crash + a liquidity crunch + a refusal to cooperate with its counterparties. Tether is no longer a "stablecoin," but rather a leveraged macro hedge fund. 03. The original sin of tools? In 2025, the propaganda war against Tether reached new heights. Consumer organizations launched a barrage of attacks in Times Square and on national television networks, accusing Tether of being a "currency of choice for criminals." A UNODC report revealed USDT's role in Southeast Asian crime. An Elliptic investigation revealed that wallets associated with the Cambodian "Huiwang Guarantee" platform processed over $11 billion in transactions, the vast majority in USDT. This "Amazon of the criminal world" offered a one-stop shop for money laundering, fake passports, and stolen accounts. The data is accurate, and the cases exist. But the question remains: are these accusations fair? From another perspective, US dollar cash is also the preferred choice for global criminal networks. Mexican drug cartels, Colombian cartels, and Middle Eastern terrorist organizations—which of them doesn't use the US dollar for transactions? Yet, no one accuses the US dollar of being a "tool of crime" because of this. Because everyone understands that the tool itself is neutral; the key lies with the user. A kitchen knife can be used to cut vegetables, but it can also injure people, but you wouldn't ban everyone from using kitchen knives because of that. USDT also serves millions of legitimate users: Hedging tool: In countries with high inflation, such as Argentina and Turkey, people use USDT to protect their wealth from being swallowed up by the devaluation of their local currencies; Cross-border payments: Millions of freelancers and cross-border e-commerce businesses worldwide use USDT for low-cost money transfers; Market infrastructure: supporting the daily transactions of tens of millions of investors worldwide. Ironically, USDT effectively acts as a "digital ambassador for the US dollar," helping the dollar expand its global influence. For every USDT issued, market demand for dollar-denominated assets increases by one dollar. Tether holds over $100 billion in US Treasury bonds, equivalent to the reserves of a medium-sized country. In a sense, Tether is an extension of dollar hegemony into the digital world. Tether is well aware of its situation and actively cooperates with law enforcement, proactively freezing wallets suspected of being involved in crimes, cooperating with TRM Labs to establish the "T3 Financial Crime Unit," and working with the FBI and DOJ to bring several criminals to justice. From this perspective, Tether's efforts should be recognized, rather than simply criticized. The real issue isn't USDT as a tool, but rather: how to establish effective regulation without stifling innovation? How to find a balance between combating crime and protecting legitimate users? 04. Washington's Dilemma For the U.S. government, Tether is a complex entity. On the one hand, USDT is used to circumvent sanctions and launder money, violating national security red lines. On the other hand, USDT is expanding the influence of the US dollar globally. In regions where the traditional US banking system cannot reach—from Latin America to Africa, from Southeast Asia to the Middle East—USDT has become a "digital agent" of the US dollar. Banning Tether would be tantamount to handing over the demand for dollars in these regions to competitors. This is a difficult choice. Tether's strategy is clear: on the one hand, it actively cooperates with law enforcement to prove itself as an "ally"; on the other hand, it seeks geopolitical protection by investing in El Salvador and becoming deeply intertwined with the country that has legal tender for Bitcoin. However, ultimate control over dollar clearing rests with Washington. If the Treasury Department's OFAC adds Tether to its sanctions list, any entity globally interacting with USDT will face secondary sanctions. More subtly, Tether's more than $100 billion in US Treasury bonds are held in custody by Wall Street brokerage firm Cantor Fitzgerald. If the government orders a freeze, the "excess reserves" will become an inaccessible figure overnight. Ironically, the more US Treasury bonds Tether holds, the more dependent it becomes on US regulation. It thinks it's buying "safe assets," but in reality, it's handing its lifeline over to Washington. 05. Summary In 2025, Tether is standing on a tightrope. From a financial perspective, Tether is not currently insolvent. S&P's downgrade and Hayes' projections highlight potential risks—its asset structure is indeed fragile, and its risk exposure is increasing. However, barring a perfect storm of "market crash + bank run," its substantial interest income and liquidity reserves are sufficient to weather economic cycles. The real uncertainty lies in Washington's attitude. USDT is neutral as a tool, just like the US dollar, gold, and AI; it can be used legally or abused. The key is not to ban the tool itself, but to regulate its users. Tether's efforts—freezing criminal accounts, cooperating with law enforcement, and establishing a compliance system—deserve recognition. However, in geopolitical games, rationality often gives way to political needs. For ordinary investors, holding USDT is not the same as holding cash in US dollars. It is more like a "high-yield bond" that includes the volatility risk of Bitcoin, credit risk, and geopolitical risk. You enjoy the convenience of liquidity and global accessibility, but you also bear the risk of regulatory shocks. The S&P downgrade and Hayes warning are not meant to prompt you to sell immediately, but rather to remind you that the risk premium has changed. USDT remains an indispensable infrastructure in the crypto market, continuing to provide value to millions of users worldwide. However, its fate depends not only on its financial statements, but also on which side the political scales in Washington ultimately tip. Because this $184 billion digital dollar empire is walking a tightrope. A gust of wind could cause it to fall.Author: Clow Produced by: Plain Language Blockchain Tether (USDT), with a market capitalization of $184 billion, is the cornerstone of liquidity in the crypto market, with daily trading volume often exceeding the combined volume of Bitcoin and Ethereum. However, this digital dollar empire is facing an unprecedented triple crisis. In the fourth quarter of 2025, Standard & Poor's downgraded its rating to the lowest "weak" level; BitMEX founder Arthur Hayes warned that a 30% drop in gold and Bitcoin holdings would lead to its bankruptcy; the United Nations and consumer organizations accused USDT of becoming the preferred tool for fraud, money laundering networks and sanctioned entities in Southeast Asia. Is Tether an impregnable fortress or a crumbling giant? 01. S&P issues death sentence In November 2025, S&P lowered Tether's rating from "4 (restricted)" to "5 (weak)"—the lowest possible rating in the rating system. For institutional investors subject to strict compliance restrictions, holding "weak" rated assets is tantamount to suicide on the board of directors. S&P's reasoning is straightforward: Tether is aggressively increasing its holdings of high-risk assets. The data doesn't lie. According to the Q3 2025 audit report, the proportion of high-risk assets surged from 17% to 24%. For every $100 USDT, $24 is staked in Bitcoin, gold, mystery loans, and "other investments." Bitcoin: $9.85 billion Gold and other precious metals: $12.9 billion Guaranteed loans: US$14.6 billion Other investments: $3.9 billion Key data: Tether has an equity buffer of approximately $6.8 billion, while its Bitcoin holdings exceed that figure. "If the price of Bitcoin falls sharply, coupled with the depreciation of other high-risk assets, Tether's reserve coverage ratio will fall below 100%," S&P wrote bluntly. In contrast, Circle (USDC) received a “strong” rating because it is almost entirely backed by U.S. Treasury bonds and bank deposits. Tether is more like an aggressive macro hedge fund, earning interest on US Treasury bonds while investing the profits in Bitcoin and gold, betting on the long-term depreciation of the US dollar. Tether CEO Paolo Ardoino responded defiantly: "We wear your loathing with pride." He has the confidence: Tether holds over $100 billion in U.S. Treasury bonds with an annualized yield of 4-5%, earning billions of dollars annually without lifting a finger. Which traditional bank doesn't operate with high leverage? Tether, at least, has full reserves. But the market won't change its rules just because of stubbornness. S&P's downgrade has already crossed out institutional investors' compliance checklist. 02. A Trader's Doomsday Prediction Arthur Hayes did the math for Tether—it was simple to the point of being brutal. The logic is based on a primary school formula: Equity = Total Assets - Total Liabilities According to Tether's Q3 2025 data report released by accounting firm BDO: Total assets: US$181.2 billion Total liabilities: US$174.4 billion Equity buffer: $6.8 billion Hayes has its sights set on “dangerous goods” on the asset side: $22.8 billion worth of Bitcoin and gold. Stress test: If the price drops by 30% simultaneously, Tether will lose $22.8 billion × 30% = $6.84 billion, which would wipe out its entire equity. 30% is not an extreme assumption. On March 12, 2020, Bitcoin plummeted by 40%, and in 2022, LUNA crashed, dropping by 35%. In the crypto market, this is a very real possibility. But the counterattack came quickly. Former Citi analyst Joseph Ayoub points out that Hayes overlooked a crucial point: Tether has a money-printing machine. With $135 billion in US Treasury bonds and an annualized return of 4%, that means earning $450 million per month passively. Even if there's a $6.8 billion paper loss, it can be covered in 15 months. The prerequisite is: avoid a massive bank run. More importantly, Tether has $140 billion in liquid assets. Even if it faces $50 billion in redemptions (far exceeding the scale of the FTX collapse), it can cope by selling US Treasury bonds, without having to sell Bitcoin at a low price. As long as the market doesn't experience a simultaneous crash and run on funds, Tether can weather the storm. But crises often come in pairs. This is how Lehman Brothers collapsed in 2008: a market crash + a liquidity crunch + a refusal to cooperate with its counterparties. Tether is no longer a "stablecoin," but rather a leveraged macro hedge fund. 03. The original sin of tools? In 2025, the propaganda war against Tether reached new heights. Consumer organizations launched a barrage of attacks in Times Square and on national television networks, accusing Tether of being a "currency of choice for criminals." A UNODC report revealed USDT's role in Southeast Asian crime. An Elliptic investigation revealed that wallets associated with the Cambodian "Huiwang Guarantee" platform processed over $11 billion in transactions, the vast majority in USDT. This "Amazon of the criminal world" offered a one-stop shop for money laundering, fake passports, and stolen accounts. The data is accurate, and the cases exist. But the question remains: are these accusations fair? From another perspective, US dollar cash is also the preferred choice for global criminal networks. Mexican drug cartels, Colombian cartels, and Middle Eastern terrorist organizations—which of them doesn't use the US dollar for transactions? Yet, no one accuses the US dollar of being a "tool of crime" because of this. Because everyone understands that the tool itself is neutral; the key lies with the user. A kitchen knife can be used to cut vegetables, but it can also injure people, but you wouldn't ban everyone from using kitchen knives because of that. USDT also serves millions of legitimate users: Hedging tool: In countries with high inflation, such as Argentina and Turkey, people use USDT to protect their wealth from being swallowed up by the devaluation of their local currencies; Cross-border payments: Millions of freelancers and cross-border e-commerce businesses worldwide use USDT for low-cost money transfers; Market infrastructure: supporting the daily transactions of tens of millions of investors worldwide. Ironically, USDT effectively acts as a "digital ambassador for the US dollar," helping the dollar expand its global influence. For every USDT issued, market demand for dollar-denominated assets increases by one dollar. Tether holds over $100 billion in US Treasury bonds, equivalent to the reserves of a medium-sized country. In a sense, Tether is an extension of dollar hegemony into the digital world. Tether is well aware of its situation and actively cooperates with law enforcement, proactively freezing wallets suspected of being involved in crimes, cooperating with TRM Labs to establish the "T3 Financial Crime Unit," and working with the FBI and DOJ to bring several criminals to justice. From this perspective, Tether's efforts should be recognized, rather than simply criticized. The real issue isn't USDT as a tool, but rather: how to establish effective regulation without stifling innovation? How to find a balance between combating crime and protecting legitimate users? 04. Washington's Dilemma For the U.S. government, Tether is a complex entity. On the one hand, USDT is used to circumvent sanctions and launder money, violating national security red lines. On the other hand, USDT is expanding the influence of the US dollar globally. In regions where the traditional US banking system cannot reach—from Latin America to Africa, from Southeast Asia to the Middle East—USDT has become a "digital agent" of the US dollar. Banning Tether would be tantamount to handing over the demand for dollars in these regions to competitors. This is a difficult choice. Tether's strategy is clear: on the one hand, it actively cooperates with law enforcement to prove itself as an "ally"; on the other hand, it seeks geopolitical protection by investing in El Salvador and becoming deeply intertwined with the country that has legal tender for Bitcoin. However, ultimate control over dollar clearing rests with Washington. If the Treasury Department's OFAC adds Tether to its sanctions list, any entity globally interacting with USDT will face secondary sanctions. More subtly, Tether's more than $100 billion in US Treasury bonds are held in custody by Wall Street brokerage firm Cantor Fitzgerald. If the government orders a freeze, the "excess reserves" will become an inaccessible figure overnight. Ironically, the more US Treasury bonds Tether holds, the more dependent it becomes on US regulation. It thinks it's buying "safe assets," but in reality, it's handing its lifeline over to Washington. 05. Summary In 2025, Tether is standing on a tightrope. From a financial perspective, Tether is not currently insolvent. S&P's downgrade and Hayes' projections highlight potential risks—its asset structure is indeed fragile, and its risk exposure is increasing. However, barring a perfect storm of "market crash + bank run," its substantial interest income and liquidity reserves are sufficient to weather economic cycles. The real uncertainty lies in Washington's attitude. USDT is neutral as a tool, just like the US dollar, gold, and AI; it can be used legally or abused. The key is not to ban the tool itself, but to regulate its users. Tether's efforts—freezing criminal accounts, cooperating with law enforcement, and establishing a compliance system—deserve recognition. However, in geopolitical games, rationality often gives way to political needs. For ordinary investors, holding USDT is not the same as holding cash in US dollars. It is more like a "high-yield bond" that includes the volatility risk of Bitcoin, credit risk, and geopolitical risk. You enjoy the convenience of liquidity and global accessibility, but you also bear the risk of regulatory shocks. The S&P downgrade and Hayes warning are not meant to prompt you to sell immediately, but rather to remind you that the risk premium has changed. USDT remains an indispensable infrastructure in the crypto market, continuing to provide value to millions of users worldwide. However, its fate depends not only on its financial statements, but also on which side the political scales in Washington ultimately tip. Because this $184 billion digital dollar empire is walking a tightrope. A gust of wind could cause it to fall.