S&P Global Ratings has downgraded Tether’s USDt to the lowest score on its stablecoin stability scale, questioning the token’s ability to maintain its dollar peg.
The “weak” assessment was due to several factors, including Tether backing USDt (USDT) with “higher-risk” assets such as Bitcoin (BTC), gold, loans, and corporate bonds that are subject to higher volatility, according to S&P Global. The report read:
“Bitcoin represents 5.6% of USDT in circulation, exceeding the 3.9% overcollateralization margin associated with a collateralization ratio of 103.9%. A decline in the price of bitcoin or the value of other higher-risk assets could therefore reduce collateral coverage.”
Tether is headquartered in El Salvador and is regulated according to the National Commission of Digital Assets (CNAD), which has looser requirements for reserve assets backing stablecoins, S&P said.
A lack of sufficient audits or proof-of-reserve reports was also cited as a core driver of the weak stability rating. Despite the weak rating, S&P said 75% of USDt’s backing comes from US Treasurys and other short-term financial instruments that are “low risk.”
In a statement to Cointelegraph, Tether classified the report as “misleading,” saying that it “strongly disagrees with the characterization presented in the report,” and that it “fails to capture the nature, scale, and macroeconomic importance of digitally native money and overlooks data that clearly demonstrate USDT’s resilience, transparency, and global utility.”
Tether CEO Paolo Ardoino also pushed back against the new rating and the utility of financial ratings agencies in general.
“The classical rating models built for legacy financial institutions historically led private and institutional investors to invest their wealth into companies that, despite being attributed investment grade ratings, collapsed,” Ardoino said.
The report came amid a landmark year for stablecoins, following the passage of regulations in the US, the administration of US President Donald Trump prioritizing stablecoins as a way to maintain US dollar hegemony, and the stablecoin market cap topping $300 billion.
Related: Tether to accelerate push into commodity lending with cash, USDt credit
Tether is acting more like a central bank and accumulating significant gold reserves
Tether is the 17th largest holder of US Treasurys in the world, with over $112 billion in short-term US government securities, surpassing most countries, including South Korea, Saudi Arabia, and Germany, according to Ardoino.
The company also accumulated 116 tons of gold held in reserve, rivaling the reserves of nation-states and central banks.
Tether’s accumulation of gold, US government securities, and its ability to mint and redeem digital dollars have led some analysts to claim that Tether is now operating like a central bank.
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