S&P Global Ratings has downgraded Tether’s flagship stablecoin USDT to the weakest possible score on its stablecoin stability scale, citing increased exposure to risky assets like bitcoin BTC$88,308.01 and ongoing gaps in reserve disclosure.
According to the revised assessment published on Wednesday, the ratings agency lowered USDT’s score in its ability to maintain price peg to the U.S. dollar to 5 (weak) from the previous 4 (constrained), which had been assigned in December 2023.
Tether pushed back against S&P’s assessment in a statement shared with CoinDesk.
“Tether strongly disagrees with the characterization presented in the report, which applies a legacy framework that fails to capture the nature, scale, and macroeconomic importance of digitally native money and overlooks data that clearly demonstrate USDT’s resilience, transparency, and global utility,” the statement said.
Turning back to S&P, the report noted that BTC now accounts for about 5.6% of USDT’s backing — more than its 3.9% overcollateralization margin — raising concerns that a sharp price drop could leave the token undercollateralized.
The firm’s stablecoin reserves also include gold, corporate bonds, secured loans and other investments with varying degrees of credit and market risk, S&P added. The agency pointed to oft-cited concerns about a lack of detailed public reporting on the valuation of these assets and the creditworthiness of the banks and custodians holding them.
“A drop in the bitcoin’s value combined with a decline in value of other high-risk assets could therefore reduce coverage by reserves and lead to USDT being undercollateralized,” the report said.
Tether’s USDT is the largest stablecoin in circulation, with a market cap exceeding $180 billion. It plays a central role in global crypto markets, especially in emerging economies where access to U.S. dollars can be limited. For years, concerns over the stability and backing of USDT, often referred to as “Tether FUD,” have sparked debate among the crypto observers and regulators. Despite that, USDT’s price has maintained its price peg, a point that even S&P acknowledged in the report.
USDT is backed by a mix of assets, with U.S. Treasuries and cash-like assets making up 77% of the reserves, according to Tether’s recent disclosures. Tether previously said that it planned to phase out secured loans from the reserve by the end of 2023. However, those assets still made up 8%, valued at over $14 billion, of the backing assets as of September 2025, according to the latest attestation signed by BDO Italy.
According to the U.S. stablecoin law enacted this year, also known as the GENIUS Act, issuers are required to back tokens 1:1 by short-term U.S. government bonds and liquid assets like money market funds and repo agreements.
Read more: ECB Doubles Down on Warning That Stablecoins Could Pose Global Financial Risks