Bitcoin News Today: S&P Flags Tether's Risky Reserves as Dollar Peg Faces Credibility Crisis

Tether's USDT stablecoin faces a significant credibility test after S&P Global Ratings downgraded its ability to maintain its dollar peg to "weak" from "constrained," citing risks from its reserve composition. The move, announced in a report, highlights growing concerns over the stablecoin's exposure to higher-risk assets, including 5.6% of its reserves in Bitcoin (BTC-USD), which now exceeds the 3.9% overcollateralization margin required to absorb potential value declines. S&P warned that a drop in Bitcoin's value combined with losses in other high-risk assets could push USDT into an undercollateralized state, threatening its 1:1 peg to the U.S. dollar.

Tether's reserve strategy has shifted notably this year, with the company amassing $14 billion in gold reserves-up from $5.3 billion in early 2025-and expanding its stake in Bitcoin to $9.9 billion according to Coinfomania. Despite these moves, the stablecoin's reliance on volatile assets has drawn scrutiny. S&P criticized the lack of transparency in Tether's reserve management and the absence of a robust regulatory framework to safeguard against insolvency risks. The downgrade comes amid a broader crypto market slump, with Bitcoin down 30% from its peak and spot Bitcoin ETFs bleeding $3.5 billion in November outflows, exacerbating concerns about Tether's role as a liquidity backbone.

Tether CEO Paolo Ardoino defended the company's strategy, emphasizing quarterly independent audits and a track record of fulfilling all redemption requests. The firm has also bolstered its gold reserves to 116 tonnes, rivaling the holdings of central banks like South Korea's. Jefferies analysts noted that Tether's gold purchases-accounting for 2% of global demand-may have contributed to recent gold price movements. Meanwhile, Tether's expansion into tokenized gold (XAU₮) and cross-chain liquidity networks, such as USDT0, underscores its ambition to bridge crypto and traditional markets.

The downgrade adds pressure on Tether as it navigates regulatory scrutiny and market volatility. While the company has seen profits exceed $10 billion in the first nine months of 2025, the S&P rating could erode investor confidence, particularly if Bitcoin's decline persists. For now, Tether remains the largest stablecoin with a $184.4 billion supply, but the S&P warning signals a potential inflection point in its quest to balance growth with stability.