S&P Global Ratings has downgraded Tether’s USDt (USDT) stablecoin to its lowest stability rating, citing risks to the token’s ability to maintain its $1 peg. The assessment, released on November 27, 2025, highlights exposure to volatile assets and potential collateral shortfalls, raising fresh questions about USDT’s reserves in a market where stablecoins underpin over $170 billion in daily crypto volume.
The Downgrade: “Weak” Rating for USDT Peg Stability
S&P assigned USDT a “weak” score on its stablecoin stability scale, the lowest possible rating. The agency pointed to Tether’s inclusion of “higher-risk” assets in its reserves as the primary concern, noting that these holdings could undermine the peg during market stress.
Specific issues raised:
- Bitcoin Exposure: BTC accounts for 5.6% of USDT in circulation.
- Collateral Ratio: 103.9%, with only a 3.9% overcollateralization margin.
- Other Assets: Gold, loans, and corporate bonds add volatility risk.
S&P warned: “A decline in the price of bitcoin or the value of other higher-risk assets could therefore reduce collateral coverage.”
At current prices, with Bitcoin near $91,302 and USDT circulation exceeding $170 billion, even moderate BTC drops could pressure the peg if reserves fall short.
- Rating: Weak (lowest on S&P scale).
- BTC in Reserves: 5.6% of USDT.
- Overcollateralization: 3.9% margin.
Tether’s Response: “Misleading” Report
Tether quickly rejected the downgrade, calling S&P’s analysis “misleading” and emphasizing its reserves remain fully backed with high-quality assets. The company highlighted regular attestations showing overcollateralization and dismissed concerns about BTC exposure as outdated, noting diversification strengthens long-term stability.
Tether maintains quarterly attestations from top accounting firms, with the latest confirming reserves exceed liabilities by billions. The firm argues its asset mix — including U.S. Treasuries, cash equivalents, and secured loans — provides robust protection against volatility.
Market Reaction and Broader Context
USDT traded steady at $1.00 despite the report, with volume exceeding $50 billion in 24 hours. The downgrade has renewed debate over stablecoin transparency, especially as competitors like USDC emphasize conservative reserves. Bitcoin held near $91,302, down 0.5% daily, while sentiment remains mixed amid Fed policy uncertainty.
S&P’s assessment aligns with ongoing regulatory scrutiny of stablecoins, with the EU’s MiCA framework and U.S. proposals pushing for stricter reserve standards.
In summary, S&P’s “weak” downgrade of USDT’s dollar peg rating due to BTC and high-risk asset exposure has intensified transparency debates, though Tether dismisses it as misleading amid steady $1 peg and $170 billion circulation.
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