Tether Downgraded by S&P as Debate Over USDT Reserves Intensifies
S&P Global on Wednesday downgraded Tether’s USDT stablecoin to its lowest rating on the agency’s stablecoin stability scale, reigniting long-running questions about transparency and reserve backing.
The crypto industry has grown familiar with such skepticism, coining a dismissive term for it: “Tether FUD.” Despite repeated scrutiny, USDT has consistently maintained its U.S. dollar peg and redeemability, weathering bull and bear markets alike, and surviving high-profile industry collapses including Sam Bankman-Fried and Alex Mashinsky. At the same time, Tether has emerged as one of the most profitable crypto companies, reporting over $10 billion in earnings through the first nine months of 2025—figures comparable to major Wall Street firms like Goldman Sachs and Morgan Stanley.
But the current bear market has brought renewed attention from traditional finance. On the slow trading day before Thanksgiving, S&P lowered USDT’s rating from 4 to 5, its weakest level. The downgrade cited familiar concerns over reporting opacity and flagged a newer issue: bitcoin now accounts for more than 5% of USDT’s reserves, meaning sustained BTC price declines could potentially threaten collateralization.
Tether CEO Paolo Ardoino responded defiantly: “We wear your loathing with pride.” He criticized traditional finance, saying, “The traditional financial system is so broken that it fears any company operating outside its constraints. Tether has built the first overcapitalized company in finance, with no toxic reserves.”
The conversation spilled onto social media over the weekend after angel investor Jason Calacanis suggested Tether sell all its bitcoin, hold only U.S. Treasuries, and complete two independent audits by American firms. The response from crypto enthusiasts was swift, highlighting the impracticality of swapping a small portion of BTC for government debt and recalling Calacanis’ prior calls for bank bailouts during the Silicon Valley Bank collapse in March 2023.
Audits remain a central issue. Financial blogger Quoth the Raven, formerly a gold advocate and now a bitcoin supporter, wrote: “When a company refuses a full, independent audit, it’s never because everything is pristine. Markets have a long, bloody track record of chewing up the naïve. An audit is the bare minimum for any entity issuing tens of billions in synthetic dollars that underpin entire markets.”
USDT continues to function as designed, but S&P’s downgrade underscores ongoing tension between crypto companies and traditional finance, highlighting the scrutiny stablecoins face as they expand their role in global markets.
