- Standards and Poor’s Global Ratings downgraded Tether’s Stablecoin Stability Assessment to “weak” with a score of 5.
- The report cites Tether’s reserve exposure to high-risk assets such as Bitcoin, Gold, loans, and corporate bonds.
- Bitcoin makes up about 5.6% of Tether’s reserves, exceeding the 3.9% safety margin, raising concerns about undercollateralization.
- Tether offers limited transparency on its counterparties and the segregation of assets within its reserves.
- Despite risks, Tether reported profits exceeding $10 billion in the first three quarters of 2025.
Standards and Poor’s (S&P) Global Ratings has lowered the Stablecoin Stability Assessment for Tether (USDT) to its lowest rating, “weak,” scoring 5 on a numerical scale. This update evaluates Tether’s ability to maintain its value peg amid various reserve risks. The report was released recently and addresses ongoing concerns over Tether’s financial backing.
The assessment highlights Tether’s reserves include high-risk assets such as bitcoin (BTC), gold, secured loans, corporate bonds, and other investments. These assets come with several risks like credit, market, interest-rate, and foreign-exchange risks. S&P notes that bitcoin represents approximately 5.6% of USDT in circulation, which surpasses the 3.9% overcollateralization margin set for safety.
“BTC now represents about 5.6% of USDT in circulation, exceeding the 3.9% overcollateralization margin, indicating the reserve can no longer fully absorb a decline in its value,” the report states. It adds that a simultaneous drop in bitcoin’s price and other risky assets could leave Tether’s reserves insufficient, causing USDT to be undercollateralized.
The report also criticizes Tether for providing minimal details about its counterparties. This lack of transparency complicates full risk analysis and creditworthiness evaluations. Additionally, while Tether claims its investments are kept separate from the core reserve, S&P flags limited public information on governance, internal controls, and how these activities are segregated.
In a comparison of stablecoin ratings, USDT and TrueUSD both scored “weak” (5), while Circle’s USDC received a “strong” (2) rating. Other stablecoins like FDUSD and USDS were rated “constrained” (4), and USD-backed coins such as USDP and EURC were rated “strong” (2).
Despite the concerns outlined by S&P, Tether reported more than $10 billion in profits during the first three quarters of 2025. According to Tether’s blog, this level of profit would have allowed the company to remove bitcoin from its reserves if it chose to do so.
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