TLDR
S&P Global Ratings downgraded Tethers USDT reserves on its stablecoin stability scale to 5 (weak) per a recent assessment by S&P Global Ratings.
- USDTs score moved from 4 (constrained) to 5 (weak) on Nov 26, 2025, per The Blocks summary.
- The downgrade cited increased high-risk reserve assets and disclosure gaps, noted in the FT report.
- Tethers CEO publicly criticized the assessment, as covered by CryptoPotato.
Deep Dive
1. Downgrade Details
S&P Global Ratings cut USDTs stability assessment from 4 to 5 (weak), its lowest tier. The timing and score change are detailed in The Blocks report and the FT coverage.
S&Ps scale evaluates the likelihood a stablecoin can maintain its peg during stress. A 5 (weak) signals heightened risk in stress scenarios, particularly around reserve quality and liquidity.
If market volatility spikes, USDTs reserve mix could be less resilient than peers with more conservative, fully liquid reserves.
2. Reasons Cited
S&P highlighted a rising share of high-risk assets in reserves (including Bitcoin, gold, secured loans, and corporate bonds) and persistent disclosure gaps on custodians and counterparties, per the FT report and Cointelegraphs recap.
- Bitcoin exposure grew to about 5.6% of reserves, exceeding USDTs overcollateralization margin, making drawdowns harder to absorb, per The Block.
- S&P noted limited transparency around reserve composition and risk management procedures, as discussed in the FT coverage.
A sharp decline in risk-sensitive assets (for example, BTC and corporate credit) alongside thin disclosures could raise undercollateralization concerns during stress.
3. Tethers Response
Tether disputed the assessment and its methodology. CEO Paolo Ardoino criticized traditional rating models and defended the firms approach, as reported by CryptoPotato and echoed in broader coverage like Cointelegraph.
Tether argues USDT has maintained stability through multiple market crises and emphasizes substantial holdings in Treasuries alongside diversified reserves.
Expect continued debate between traditional ratings frameworks and crypto-native reserve strategies. For users, the practical question is reserve liquidity and transparency during stress.
Conclusion
The agency behind the downgrade is S&P Global Ratings. The change reflects concerns about higher-risk reserve allocations and disclosure gaps, which could matter most during market stress. If you monitor stablecoins, focus on reserve composition, liquidity, and transparency signals in forthcoming issuer updates.
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