S&P Downgrades USDT’s Dollar Peg Rating to Lowest Score

• S&P Global Ratings downgraded Tether’s USDT to its lowest stability rating.
• The downgrade cites higher-risk reserve assets like Bitcoin, gold, corporate bonds, and loans.
• S&P says the backing of USDT lacks full audits and strong proof-of-reserves.
• Tether disputes the report, calling it misleading and incomplete.
• Despite concerns, 75% of USDT reserves still come from low-risk U.S. Treasurys.
• Analysts note Tether now operates similarly to a central bank due to massive Treasury and gold holdings.

S&P Global Ratings has issued a major downgrade to Tether’s USDT, giving it the lowest score on its stablecoin stability scale. The agency expressed concerns about Tether’s ability to maintain its dollar peg, pointing to the mixture of higher-risk assets that back the token. According to S&P, USDT’s reserves include Bitcoin, gold, corporate bonds, and secured loans — assets that hold greater volatility compared to cash or U.S. Treasurys. The report noted that Bitcoin alone represents more than 5% of USDT’s backing, which exceeds the buffer allowed by Tether’s collateralization margin. This means a significant drop in the value of Bitcoin or other risk-exposed instruments could reduce the depth of Tether’s reserve coverage.

S&P also highlighted regulatory concerns. Tether is headquartered in El Salvador and regulated under the National Commission of Digital Assets (CNAD), which has fewer restrictions on reserve composition. The agency argued that the lighter requirements allow Tether to use more volatile assets in its collateral pool, raising questions about the stability of USDT during market stress. In addition to this, S&P criticized the lack of comprehensive audits or standardized proof-of-reserve reporting, calling it a major factor behind the weak rating.

Despite these concerns, S&P acknowledged that the majority of USDT’s backing is still made up of low-risk short-term U.S. Treasurys, representing roughly 75% of reserves. Even so, the presence of riskier instruments was enough to push the stablecoin to the bottom of the rating system.

Tether responded strongly to S&P’s assessment, calling the report misleading and incomplete. A spokesperson told Cointelegraph that S&P failed to account for USDT’s long record of maintaining its peg, as well as the global utility and liquidity the stablecoin provides. Tether CEO Paolo Ardoino also criticized traditional rating agencies, arguing that legacy financial models have historically misled investors and contributed to major collapses in the finance world. He suggested that the evaluation fails to reflect the real-world performance of USDT and its role in the digital economy.

The downgrade comes at a time when stablecoins are gaining global attention. With the United States passing new regulation and the current administration positioning stablecoins as a way to strengthen dollar dominance, the broader market has surpassed $300 billion in value. Tether itself has grown to a scale comparable to nation-state financial entities. Ardoino highlighted that Tether now holds over $112 billion in short-term U.S. government debt, making the company the 17th largest holder of Treasurys worldwide — surpassing several major economies, including Germany, Saudi Arabia, and South Korea.

Beyond government securities, Tether has also accumulated more than 116 tons of gold. Analysts say this level of asset accumulation places Tether closer to the behavior of a central bank than a typical private company. The ability to mint, redeem, and manage large pools of financial instruments has raised new debates about how much influence the company has on global liquidity flows and the stability of digital dollars.

Final Thought

The downgrade from S&P has reignited long-standing questions about transparency, reserve composition, and systemic influence. While Tether dismisses the concerns, the rating highlights a growing divide between traditional financial standards and the evolving role of major stablecoin issuers. As Tether expands its global footprint, these discussions will likely intensify.