S&P Global Ratings has downgraded Tether’s USDT to its lowest stability tier, warning that the world’s largest stablecoin is now more vulnerable to market shocks than previously understood.
The downgrade, issued on November 26, 2025, centers on growing exposure to volatile assets, concerns over disclosure gaps, and the continued absence of rigorous regulatory safeguards around Tether’s operations.
A Stability Profile Strained by Higher-Risk Holdings
According to S&P’s review, Tether has increased its allocation to assets that carry meaningful downside risk, including Bitcoin, gold, secured loans, and corporate bonds. While Tether previously emphasized conservative reserves as the cornerstone of USDT’s peg, the rating agency says the composition has shifted enough to weaken that foundation.
The most pressing issue is the role of Bitcoin in the reserve structure. S&P estimates that Bitcoin now represents roughly 5.6% of USDT in circulation. That share exceeds the issuer’s overcollateralization buffer, meaning a sharp Bitcoin price decline could leave the stablecoin undercollateralized during a period of market stress.
Tether Becomes One of the World’s Largest Gold Buyers
Transparency Remains a Persistent Weak Spot
S&P also cited long-standing transparency concerns that continue to cloud confidence in USDT’s backing. The rating notes that Tether provides insufficient information regarding the credit quality of its custodians and counterparties, creating uncertainty around the stability of assets supporting the peg. These gaps extend to disclosures: S&P found repeated instances of missing details on asset valuation and reserve composition, preventing a full independent assessment of risk.
In addition to disclosure shortcomings, the report points to structural weaknesses, including the lack of a clear regulatory framework and the absence of segregated assets that could shield customers in the event of an issuer insolvency. Together, these factors contributed to the agency’s decision to assign a “weak” rating, the lowest available in its stablecoin assessment system.
USDT Holds Its Peg – for Now
Despite the downgrade, S&P acknowledges that Tether has successfully maintained price stability through multiple episodes of crypto market volatility. USDT continues to trade reliably around its $1 peg, even during periods marked by liquidity imbalance or heavy selling pressure across digital assets. The firm states that this resilience is notable, though not sufficient to offset the risks tied to asset mix, governance opacity, and the unpredictability of crypto markets.