S&P downgrades Tether’s reliability rating due to a dangerous increase in risky assets in reserves, as Bitcoin’s fall weakens collateral balance.
Are risky assets exposure significantly increasing?
S&P details a clear shift: 24% of Tether’s reserves are now exposed to considered risky assets, up from 17% a year ago. Among them, Bitcoin, gold, corporate bonds, and most notably secured loans which Tether had committed to reducing.
The share of Bitcoin is of particular concern. It represents around 5.6% of reserves, more than the nominal overcollateralization margin of 3.9% that normally serves as a safety cushion. The conclusion is evident: a prolonged BTC decline could theoretically push USDT below 100% collateralization.
S&P also notes Tether still does not provide detailed information on its custodians, bank accounts, or the internal process for buying risky assets. A lack of clarity that has fueled regulators’ concern for years.
“We wear your loathing with pride.” Tether’s strong response
Tether firmly rejects the analysis. CEO Paolo Ardoino states S&P uses a rating framework unsuited to digital assets and ignores the stablecoin’s “resilience”. It highlights real-time publications, quarterly attestations signed by BDO Italy, and its central role in emerging markets where USDT acts as a true digital dollar.
According to its latest report, 77% of reserves remain invested in U.S. Treasury bonds and cash equivalents. Tether also generated over $10 billion in profits in the first nine months of the year thanks to Treasury yields. In other words, even weakened, its cash machine is still running.
A pivotal moment for stablecoins
When regulation changes the game
The new U.S. legal framework, the GENIUS Act, now mandates a strict rule: stablecoins must be 100% backed by highly liquid assets like short-term U.S. bonds. However, USDT still retains 8% of secured loans, over $14 billion. This issue alone could become the debate’s red line. Tether responds with the creation of a new regulated stablecoin, USAT, specifically designed for the U.S. market.
Between systemic risk and intact dominance
Despite the downgrade, USDT remains the absolute giant with over $180 billion in circulation. The asset has maintained its peg through several panic cycles, including in 2022 when selling pressure briefly pushed its value down.
But the new Bitcoin drop, financial market volatility, and the rise of regulated stablecoins create a new climate. USDT remains essential to the ecosystem, but its dominance now rests on shakier ground. In a market where trust is a valuable asset, every crack becomes a strategic concern.
