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S&P Cuts Tether’s USDT to Lowest Stability Score on Riskier Reserves

S&P says larger bets on bitcoin, gold, loans and corporate debt plus disclosure gaps raise the risk reserves fall short in a sharp downturn.

A representation of the cryptocurrency Tether is seen in this illustration picture taken September 8, 2025. REUTERS/Dado Ruvic/Illustration REFILE - QUALITY REPEAT
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Overview

  • Tether’s dollar-pegged token was downgraded on Nov. 26 to 5 (weak) from 4 (constrained) on S&P’s five-point stablecoin scale.
  • Bitcoin now makes up roughly 5.6% of backing, above a 3.9% overcollateralization margin S&P cites, creating a specific undercollateralization risk in a selloff.
  • Tether disclosures show 75–77% of reserves in U.S. Treasuries and cash-like assets, with higher‑risk holdings around 24% as of Sept. 30, including about 8% secured loans.
  • Tether rejected the assessment, highlighting large Treasury exposure, strong profitability and a record of meeting redemptions while maintaining USDT’s peg.
  • The downgrade does not mandate reserve changes but is expected to intensify pressure for full independent audits and could draw increased regulatory scrutiny as USDT remains the largest stablecoin (~$180–185 billion).