- S&P Global downgraded Tether‘s USDT rating to “weak” due to increased exposure to high-risk assets.
- Nearly 24% of Tether’s reserves now consist of riskier holdings, up from 17% a year earlier.
- Bitcoin now accounts for 5.6% of USDT’s reserves, exceeding the stablecoin’s collateral margin.
- S&P flagged ongoing gaps in disclosure and transparency regarding USDT’s reserve management.
S&P Global downgraded the reserve quality rating of Tether’s USDT on Wednesday, lowering it from “constrained” to its lowest level, “weak.” The downgrade followed concerns that the stablecoin’s reserves have increasingly shifted toward higher-risk assets over the past year, making full backing less certain during periods of market volatility.
According to S&P’s findings, assets such as Bitcoin, Gold, secured loans, and corporate bonds now make up nearly a quarter of Tether’s reserves—an increase from 17% a year ago. The agency noted that Bitcoin’s share alone reached 5.6% of USDT in circulation, which surpasses the stablecoin’s current overcollateralization margin of 3.9%. This signals that a significant drop in Bitcoin’s value could leave USDT vulnerable to being undercollateralized if other high-risk assets also decline.
Market data shows Bitcoin trading around $89,600 recently, with prices fluctuating significantly from a peak of over $126,000 last October to lows near $81,000 earlier in the month. Meanwhile, sentiment around USDT on Stocktwits data shifted to “extremely bearish” among retail users.
In its most recent quarterly report, Tether disclosed $181.2 billion in reserves backing $174.4 billion USDT, resulting in a collateralization ratio of 103.9%. This is a decrease from 105.1% the previous year. S&P reported that the reduced buffer heightens USDT’s exposure to price swings, particularly since the proportion of riskier assets like Bitcoin has grown.
S&P also highlighted “persistent gaps in disclosure,” a lack of asset segregation in case of insolvency, and limitations in redemption mechanisms for USDT. The agency suggested that the stablecoin’s rating could improve if allocation to high-risk assets is reduced and transparency measures are enhanced.
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