TLDR
- S&P Global Ratings assigned Tether its lowest stablecoin risk rating which is classified as “5 (weak)”.
- The agency cited concerns about Tether’s asset transparency and its growing exposure to high-risk reserve assets.
- S&P stated that Bitcoin accounts for 5.6 percent of Tether’s circulating supply which exceeds its overcollateralization buffer.
- Tether’s CEO Paolo Ardoino rejected the rating and said traditional credit models are outdated for assessing digital assets.
- Ardoino described Tether as overcapitalized and argued it has always maintained access to redemptions during market disruptions.
S&P Global Ratings gave Tether its weakest stablecoin risk score of “5 (weak)” this week. The agency cited transparency gaps, asset composition issues, and risks tied to reserves. Tether’s CEO Paolo Ardoino responded, calling the evaluation outdated and dismissive of the crypto firm’s structure.
S&P Flags Asset Risk and Transparency Gaps
S&P Global Ratings expressed concern about Tether’s reserve structure and asset disclosures. It said the company lacks consistent and complete transparency about holdings. The agency also questioned the quality of custodians and counterparties managing Tether’s assets.
According to the agency, Tether’s reserve assets now include more high-risk instruments. These include Bitcoin, gold, corporate bonds, and secured loans, which increase market and credit risk. S&P said this shift impacts Tether’s ability to handle price volatility and maintain redemptions.
S&P pointed out that Bitcoin alone makes up 5.6% of USDT’s circulating supply. That level exceeds Tether’s published overcollateralization buffer of 3.9%. It warned that falling Bitcoin prices could weaken Tether’s reserve coverage.
Tether Responds to Risk Score and Defends Stability
Tether’s CEO criticized S&P’s methods as outdated for digital asset companies. “These models were built for opaque banking systems, not transparent, fast-moving crypto firms,” said Ardoino. He said traditional frameworks failed to prevent past banking collapses.
Ardoino described Tether as “overcapitalized” and stated the company maintains sufficient liquidity for redemptions. He argued legacy rating methods do not account for Tether’s operations and structure. He also said Tether operates outside a broken financial system.
In its formal statement, Tether rejected the score and defended its operational performance. The company said it handled market stress, bank outages, and exchange failures without losing redemption access. It claimed this history proves its resilience under pressure.
Bitcoin and Gold in Reserves Draw Scrutiny
S&P warned that Tether’s growing exposure to Bitcoin and gold adds price volatility risks. These assets fluctuate rapidly and lack the stability of cash or Treasuries. The agency questioned whether this asset mix supports stablecoin obligations.
The agency highlighted that Tether’s Bitcoin share exceeds its own collateral buffer. This imbalance could affect user confidence in high-volatility scenarios. Tether’s continued reliance on such assets remains a concern for rating firms.
Earlier this week, the Financial Times reported on Tether’s gold reserves. It stated Tether is now the largest independent gold holder. This positions the token as increasingly reliant on alternative reserve assets.
Tether said it has issued $184 billion in USDT since its launch. The company claimed it backs every token with sufficient assets at all times. U.S. Treasuries remain part of its reserve mix, along with other instruments.
S&P confirmed that Tether maintained price stability during market volatility. However, it stressed that reserve quality and disclosure still fall short. The agency stood by its “5 (weak)” risk rating.
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