HSBC: Tether Downgrade by S&P Raises De-Pegging Concerns, Boosts Higher-Rated Stablecoins
HSBC highlighted that S&P Global Ratings’ downgrade of Tether’s reserve assessment to “weak” underscores the inherent de-pegging risk in stablecoins—an issue not found in other tokenized assets.
Analysts Daragh Maher and Nishu Singla noted that if holders rush to redeem, stablecoin issuers need highly liquid, low-risk reserves to maintain the peg. Otherwise, the token’s price can fluctuate, creating systemic risks.
Stablecoins, pegged to fiat or other assets, are foundational to crypto, enabling payments and cross-border transfers. Tether’s USDT remains the largest stablecoin, followed by Circle’s USDC. Because the market often treats these coins as infrastructure, reserve concerns can ripple across exchanges, trading pairs, and DeFi platforms.
S&P’s reserve rating framework, which spans “very strong” to “weak,” signals that governance, transparency, and reserve quality are crucial for institutional adoption. The downgrade reflects Tether’s rising exposure to higher-risk assets compared with cash and short-dated Treasuries.
HSBC said the shift points to growing institutional preference for regulated, transparent stablecoins. Circle’s USDC, rated higher than USDT, is well-positioned to benefit, while Tether plans a U.S.-based, dollar-backed coin to meet stricter compliance standards, highlighting how issuers may tailor products by jurisdiction and audience.
