Tether’s USDT came under scrutiny after S&P Global Ratings downgraded the largest stablecoin to its weakest score for maintaining a dollar peg, citing increased exposure to higher-risk assets and persistent gaps in reserve disclosures.
The downgrade, published Nov. 26, arrives as debates around Tether’s reserve composition intensify. Yet, USDT continues to trade at $1.00 with more than $180 billion in circulation.
USDT Stablecoin remains the largest stablecoin by market cap, and despite the ratings cut, its price has not deviated from its peg.
S&P’s updated assessment noted that Bitcoin now accounts for 5.6% of USDT’s backing, a level that surpasses its 3.9% overcollateralization margin, and warned that a sharp decline in BTC and other high-risk assets could leave reserves insufficient.
Tether Pushes Back Against S&P’s “Legacy Framework”
S&P lowered USDT’s rating from 4 (constrained) to 5 (weak) on its 1–5 stability scale, which evaluates how reliably a stablecoin can maintain its peg.
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The agency flagged exposure not only to Bitcoin and gold, but also to corporate bonds, secured loans, and other investments with limited public valuation details.
Tether strongly rejected the downgrade. In a statement shared with CoinDesk, the company said the assessment relies on a framework “that fails to capture the nature, scale, and macroeconomic importance of digitally native money,” arguing that USDT’s decade-long record of peg stability contradicts S&P’s conclusions.
Tether pointed to its 77% allocation to U.S. Treasuries and other cash-like assets, as well as regular reserve attestations conducted by BDO Italy. The company also highlighted USDT’s role in emerging markets where access to U.S. dollars is limited.
Arthur Hayes Flags USDT Reserve Risks, But Analysts Counter With Profitability
Arthur Hayes argued that Tether’s growing allocations to $12.9 billion in gold and $9.9 billion in Bitcoin, as disclosed in its Sept. 30 report, could erode its equity buffer if those assets fell 30% under mark-to-market rules. Hayes warned that such a drawdown could theoretically push USDT toward undercollateralization.
But other analysts pushed back. Joseph (@JosephA140), who said he conducted extensive research on Tether for Citi, argued that Hayes overlooked a key distinction: Tether’s disclosed reserves do not represent the company’s full corporate balance sheet.
According to Joseph, the separate balance sheet includes mining operations, equity investments, additional BTC, and retained earnings, assets not reflected in reserve attestation reports.
Joseph also pointed to Tether’s operational profitability, noting that the company holds roughly $120 billion in yield-generating U.S. Treasuries, producing an estimated $10 billion in interest income in 2025. He characterized Tether as “one of the most efficient cash-generating businesses in the world.”
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