Bitcoin News Update: Tether's USDT Rating Cut Sparks Conflict Between Cryptocurrency and Conventional Financial Systems

Tether Responds to S&P Global Ratings Downgrade

Paolo Ardoino, CEO of Tether, has criticized S&P Global Ratings for lowering its assessment of the stablecoin’s reliability, labeling the agency’s evaluation as “outdated.” Ardoino argued that traditional financial institutions fail to grasp Tether’s business model. S&P recently downgraded USDT’s peg stability from “constrained” to “weak,” citing the company’s increased investments in riskier assets such as Bitcoin and ongoing concerns about the transparency of its reserves. This decision has reignited discussions about the stability of the world’s largest stablecoin, which reportedly boasts a market capitalization of $184 billion.

S&P’s analysis revealed that Bitcoin now makes up 5.6% of Tether’s reserves, surpassing the company’s own 3.9% overcollateralization margin. The agency cautioned that a significant drop in the value of Bitcoin or other volatile holdings—including gold, corporate bonds, and secured loans—could leave USDT undercollateralized. Although the majority of Tether’s reserves (75%) are held in low-risk U.S. Treasury bills and cash equivalents, S&P criticized the company for not providing enough information about its custodians, counterparties, and how it manages reserves.

Tether has strongly pushed back against the downgrade. Ardoino described the move as evidence of “hostility” toward firms that disrupt traditional finance. He argued on X that conventional rating systems have a history of misleading investors, referencing past banking failures. Tether highlighted its consistent maintenance of the dollar peg for over a decade, its $112.4 billion in U.S. Treasury holdings, and $14 billion in gold reserves, according to recent reports.

The downgrade has triggered a range of reactions within the cryptocurrency community. Many Chinese traders, who depend on USDT for international transactions, voiced concerns online about the risk of the stablecoin losing its peg. Meanwhile, industry observers such as BitMEX co-founder Arthur Hayes have warned that Tether’s financial position could become precarious if Bitcoin’s price were to fall sharply, given the company’s exposure to volatile assets.

S&P also pointed out operational vulnerabilities at Tether, such as limited separation of assets to guard against insolvency and weaknesses in its redemption processes. The agency suggested that Tether’s rating could improve if the company reduced its exposure to high-risk assets and increased transparency. Despite these recommendations, Tether has consistently declined to undergo independent audits by major accounting firms, though it has released quarterly reserve attestations since 2021.

This situation highlights ongoing tensions in the stablecoin industry. While USDT remains the leading digital dollar with $184 billion in liabilities, regulatory bodies and rating agencies are stepping up their scrutiny of how reserves are managed. Other stablecoins like USD Coin (USDC) face similar issues, but Tether’s size and its assertive public relations approach have kept it at the center of debates over the future of cryptocurrency in global finance.

With Bitcoin currently trading around $89,600—down 28% from its October high—the pressure on Tether’s business model is mounting. The company’s ability to maintain trust in its reserves amid regulatory and market challenges will play a crucial role in shaping the evolution of stablecoins and their place in the broader financial landscape.