S&P Global Ratings has downgraded Tether’s flagship stablecoin USDT to the lowest possible score on its stablecoin stability scale, citing increased exposure to risky assets like Bitcoin. BTC$88,308.01 and continued gaps in provision disclosure.
According to the revised assessment released on Wednesday, the rating agency lowered USDT’s score on its ability to maintain a price peg with the US dollar to 5 (weak) from the previous assignment of 4 (suppressive) in December 2023.
Tether disputed S&P’s assessment in a statement shared with CoinDesk.
“Tether strongly disagrees with the characterization presented in the report, which fails to capture the nature, scale, and macroeconomic significance of digital native money and applies a traditional framework that ignores data that clearly demonstrates USDT’s resilience, transparency, and global utility,” it said in a statement.
Returning to S&P, the report noted that BTC currently accounts for approximately 5.6% of USDT’s backing, exceeding its overcollateral margin of 3.9%, raising concerns that a sharp drop in price could lead to a shortage of collateral for the token.
The company’s stablecoin reserves also include gold, corporate bonds, secured loans, and other investments that involve varying degrees of credit and market risk, S&P added. The agency cited frequently cited concerns about the lack of detailed public reporting on the valuation of these assets and the creditworthiness of the banks and custodians that hold them.
“Therefore, a decline in the value of Bitcoin and a decline in the value of other high-risk assets could reduce reserve coverage and lead to USDT undercollateralization,” the report said.
Tether’s USDT is the largest stablecoin in circulation, with a market capitalization of over $180 billion. It plays a central role in the global cryptocurrency market, especially in emerging economies where access to the US dollar is limited. For years, concerns over the stability and support of USDT, often referred to as “Tether FUD,” have sparked debate among crypto watchers and regulators. Despite this, the USDT price has maintained its price peg, a point acknowledged by S&P in its report.
According to Tether’s recent disclosures, USDT is backed by a variety of assets, with 77% of its reserves comprised of U.S. Treasuries and cash-like assets. Tether previously said it planned to phase out secured loans from its reserves by the end of 2023. However, according to the latest certificate signed by BDO Italy, these assets still account for 8% of the underlying assets (worth over $14 billion) as of September 2025.
The U.S. Stablecoin Act (also known as the GENIUS Act) enacted this year requires issuers to back their tokens on a one-to-one basis with short-term U.S. Treasuries and liquid assets such as money market funds and repurchase agreements.
Read more: ECB strengthens warning that stablecoins could pose global financial risks
