Bitcoin News Today: S&P Downgrades Tether: Clash Over Risky Reserves and Regulatory Compliance

S&P Global Ratings has downgraded Tether's USDT stablecoin to "weak" from "constrained," marking the lowest score on its stablecoin stability scale, due to heightened exposure to high-risk assets such as Bitcoin and gold in its reserves according to analysis. The ratings agency cited concerns that Bitcoin, now accounting for 5.6% of USDT's reserves, exceeds the 3.9% overcollateralization margin, leaving the stablecoin vulnerable to undercollateralization if Bitcoin's value declines according to reports. Tether's gold holdings, which reached $12.9 billion by Q3 2025, also contributed to the downgrade, as S&P highlighted the lack of regulatory clarity and transparency around these non-traditional reserve assets as data shows. The firm warned that a combination of falling Bitcoin and gold prices could erode the reserves' coverage ratio, undermining USDT's 1:1 peg to the U.S. dollar as financial analysis indicates.

Tether's reserve composition has evolved significantly, with high-risk assets now constituting 24% of its holdings as of September 2025, up from 17% a year earlier. These include secured loans, corporate bonds, and physical gold, alongside Bitcoin according to market data. S&P emphasized structural weaknesses, such as limited transparency on reserve management, no asset segregation to protect users in case of insolvency, and unclear credit quality of custodians and counterparties according to analysis. The agency also noted that the U.S. GENIUS Act, which mandates stablecoins be fully backed by low-risk assets like Treasuries, could further pressure Tether's compliance posture, given its 8% allocation to secured loans as legal experts point out.

Tether CEO Paolo Ardoino has fiercely rejected the downgrade, calling it a product of "traditional finance's loathing" for a model he claims operates independently of "a broken financial system." In a public rebuttal, Ardoino argued that USDT's performance-maintaining its dollar peg despite market volatility-proves its resilience and that the agency's methodology is outdated as CEO claims. He also framed Tether's reserve strategy as a deliberate shift toward overcapitalization, asserting the company holds "no toxic assets" and has generated over $10 billion in net profit through Q3 2025 according to financial reports.

The downgrade highlights broader tensions in the stablecoin market. While USDT remains the largest stablecoin with a $184 billion market cap, its reliance on non-traditional reserves contrasts with competitors like USDC, which emphasize regulatory compliance as financial analysts note. Tether's aggressive gold accumulation-surpassing the reserves of nations like Hungary and Greece-reflects a strategic pivot to diversify against fiat devaluation and macroeconomic uncertainty according to market reports. However, this approach risks alienating regulators and investors wary of opaque asset backing, particularly as global scrutiny of stablecoins intensifies as market observers warn.

Analysts warn that S&P's downgrade could amplify skepticism toward privately managed stablecoin reserves, especially as the industry grapples with balancing innovation and transparency. For Tether, the challenge will be navigating a regulatory landscape increasingly hostile to non-compliant assets while defending its market dominance in a sector where trust is paramount as experts caution.