Bitcoin News Today: Traditional Ratings Clash With Crypto as S&P Downgrades Tether

S&P Global Ratings has downgraded the stability rating of Tether's USDT stablecoin to "weak" from "constrained," marking the lowest possible score on its 1–5 scale, as the ratings agency cited growing exposure to high-risk assets in the stablecoin's reserves and persistent gaps in transparency. The downgrade, announced on November 26, follows S&P's assessment that Bitcoin now accounts for 5.6% of USDT's $184.4 billion in circulation, exceeding the 3.9% overcollateralization margin outlined in Tether's latest third-quarter attestation. This shift leaves the stablecoin vulnerable to undercollateralization should Bitcoin's value decline alongside other high-risk holdings, such as gold, secured loans, and corporate bonds.

S&P highlighted that Tether's reserve portfolio has seen an increase in risky assets, with non-cash holdings rising to 24% of total reserves as of September 30, up from 17% a year earlier. The agency noted limited disclosures around custodians, counterparties, and asset composition, which it said exacerbate liquidity risks. While most reserves remain in short-term U.S. Treasuries and cash equivalents, S&P warned that reserve management lacks protections like asset segregation and broad redemption access, common in regulated markets.

Tether CEO Paolo Ardoino responded sharply to the downgrade, calling it a reflection of "loathing" from traditional finance toward companies operating outside its framework. He defended USDT's reserve structure, claiming the stablecoin holds "no toxic assets" and is "overcapitalized," with quarterly attestations showing excess reserves and profitability exceeding $10 billion year-to-date. Ardoino accused S&P of misunderstanding Tether's model, arguing that traditional ratings systems are ill-suited for digital assets and failed to prevent past banking collapses.

The downgrade places USDT in the same risk category as other stablecoins with riskier collateral or lower transparency, according to S&P. The agency warned that a sharp drop in Bitcoin or gold prices, combined with heavy redemptions, could weaken reserve coverage. S&P suggested Tether could improve its rating by reducing exposure to volatile assets and enhancing disclosures on reserve composition and banking partners.

Market data indicates limited immediate redemption pressure, with blockchain analytics showing no major outflows from exchanges or wallets post-downgrade according to analytics. However, the move could prompt regulators and institutional users to reassess risk controls for stablecoin exposure. Tether's USDT remains the largest U.S. dollar–pegged stablecoin, representing over half of global stablecoin capitalization and dominating trading volumes on crypto exchanges.