S&P Global Downgrades USDT Stability Rating Amid Bitcoin Risks

S&P Global downgraded USDT’s stability to 5, citing increased Bitcoin exposure and reserve opacity. Tether refuted the downgrade, emphasizing $135 billion in U.S. Treasuries and less than 5% total reserves in Bitcoin.

S&P Global’s decision on USDT prompts scrutiny in the stablecoin and cryptocurrency sectors, emphasizing transparency and regulatory challenges.

Tether’s USDT stability rating was reduced by S&P Global amid concerns over Bitcoin exposure exceeding transparency norms. The decision was made public through an official statement, raising questions regarding short-term and long-term impacts on the sector.

“S&P’s downgrade is based on a flawed methodology that fails to account for the strength of our reserves, our profitability, and the global utility of USDT. Tether holds over $135 billion in U.S. Treasuries and generated $13 billion in profit last year. Our exposure to Bitcoin is less than 5% of total reserves and is fully disclosed.” — Paolo Ardoino, CEO, Tether, Tether Blog

The downgrade’s immediate effect was seen as limited, with USDT maintaining its dollar peg and liquidity. Exchanges like Binance expressed continued support for USDT, underscoring its essential role in trading.

Regulatory bodies, such as the U.S. SEC, emphasize the continuing need for transparency within the stablecoin industry. Community discussions focused on regulatory signaling and market adherence to transparent reserve practices, with mixed reactions visible across social platforms and forums.

Insights from historical events, such as TerraUSD’s collapse, suggest increased scrutiny could prompt more frequent attestation and disclosure demands from stablecoin issuers. Ongoing community debates are centered around potentially heightened regulatory frameworks and evolving stablecoin security measures.