S&P Downgrades Tether's USDt to Lowest Rating Amid Reserve Concerns

S&P Global Ratings downgraded Tether's USDt stablecoin from "4 (constrained)" to "5 (weak)" on Wednesday, marking the lowest rating on the agency's stablecoin scale. The rating agency cited growing exposure to higher-risk assets including Bitcoin, gold, corporate debt, and secured loans, alongside limited transparency around custodians and counterparties^[1].

Tether CEO Paolo Ardoino rejected the downgrade, arguing that S&P relies on "a legacy framework" ill-suited for evaluating digital money. In a defiant response, Ardoino characterized the move as traditional finance resisting innovation, stating the company is "the first overcapitalized company in the financial industry, with no toxic reserves"^[1].

Despite the criticism, S&P acknowledged that USDt has maintained "a notable level of price stability" during volatile periods^[1].

Tether, based in El Salvador, claims to have issued approximately $184 billion in USDt backed by U.S. Treasuries and other reserve assets. The company emphasized it has "processed billions in redemptions while maintaining uninterrupted stability" and described USDt as critical financial infrastructure in emerging markets^[1].

S&P introduced its stablecoin rating framework in 2023 to assess digital assets pegged to government-issued currencies.