S&P Global Downgrades Tether’s USDT as Reserve Risks Rise

S&P Global Ratings has downgraded Tether’s flagship stablecoin USDT to the lowest level on its stablecoin stability scale, warning that the token’s growing exposure to high-risk assets like Bitcoin and persistent gaps in reserve transparency could threaten its ability to maintain its U.S. dollar peg. The updated assessment, released Wednesday, lowers USDT’s stability score to 5 — categorized as “weak” — from its previous score of 4 issued in December 2023.

According to S&P, Bitcoin now represents roughly 5.6% of USDT’s reserves, surpassing its 3.9% overcollateralization buffer. Analysts cautioned that a sharp decline in BTC or other volatile holdings could push the stablecoin into an undercollateralized state. Beyond Bitcoin, Tether’s reserve mix still includes gold, corporate bonds, secured loans and additional risk-bearing assets. The agency emphasized ongoing concerns surrounding limited disclosure about how these holdings are valued and the financial health of institutions safeguarding them.

Tether rejected S&P’s conclusions, arguing that the rating framework is outdated and fails to reflect the “resilience, transparency and global utility” of USDT as digitally native money. Despite recurring debates and “Tether FUD” over the years, S&P acknowledged that USDT has consistently maintained its dollar peg, even as scrutiny has intensified.

USDT remains the world’s largest stablecoin with a market capitalization exceeding $180 billion and plays a critical role in global crypto trading, particularly in emerging markets where access to U.S. dollars is often restricted. Tether’s latest disclosures indicate that 77% of reserves are held in U.S. Treasuries and cash-like assets. However, secured loans — which Tether previously pledged to phase out by the end of 2023 — still accounted for 8% of reserves, valued at more than $14 billion as of September 2025, according to an attestation by BDO Italy.

New U.S. regulations under the GENIUS Act now require stablecoin issuers to maintain 1:1 backing using short-term Treasuries and other highly liquid instruments, raising further questions about whether Tether’s reserve composition aligns with the evolving regulatory landscape.