S&P Global Ratings has reassessed Tether’s ability to maintain its one-to-one peg with the US dollar, issuing its lowest score in the Stablecoin Stability Assessment framework.
The SSA for USDT has been downgraded from 4 (constrained) to 5 (weak) following a detailed analysis of the stablecoin’s reserve composition, governance structure, and redeemability conditions. The downgrade reflects a marked increase in Tether’s exposure to high-risk assets, alongside persistent gaps in transparency regarding reserve management.
According to the latest quarterly attestation, Tether held 181.2 billion dollars in reserves against 174.4 billion dollars of USDT in circulation as of Sept. 30, 2025, for a collateralization ratio of 103.9 percent, down from 105.1 percent the previous year. A significant portion of these reserves remains invested in short-term U.S. Treasury bills and reverse repos, which S&P considers low-risk. However, the share of “higher-risk assets” has grown dramatically.
High-Risk Assets Now Represent 24 Percent of Tether’s Reserves
S&P highlights that 24 percent of Tether’s reserves are now composed of assets exposed to market, credit, and interest-rate risk, including:
- •Bitcoin
- •Gold
- •Corporate bonds
- •Secured loans
- •Other unspecified investments
Bitcoin alone represents 5.6 percent of USDT in circulation, which exceeds the 3.9 percent overcollateralization margin implied by the current reserve ratio. This means the reserve buffer can no longer fully absorb major price declines in BTC or other volatile assets. A multi-asset downturn could therefore lead to USDT becoming undercollateralized.
S&P notes that Tether has grown into one of the largest holders of U.S. Treasuries globally, with over 130 billion dollars in short-term T-bills. Despite the size of these holdings, critical gaps persist in disclosures covering custodians, bank partners, and specific counterparty exposures.
Transparency and Governance Concerns Persist
The assessment points to several ongoing weaknesses:
Limited Transparency on Reserve Composition
Tether publishes quarterly reports attested by BDO Italia, but unlike competing stablecoins, it does not offer monthly reports. The available documentation lacks detailed breakdowns of asset types, counterparties, and risk exposure.
No Asset Segregation Protections
There is no public information ensuring that reserve assets are legally insulated in case of issuer insolvency. The El Salvador regulatory framework, while a step forward, remains less robust than US or EU standards.
Redeemability Barriers
Direct redemption requires:
- •A fully verified account
- •A 150-dollar verification fee
- •A minimum redemption amount of 100,000 USDT
- •A redemption fee of 0.1 percent or 1,000 dollars
Most users depend on secondary market liquidity, which remains strong but is still constrained by the banking system’s operating hours.
Broader Business Risks
Tether’s expansion into unrelated sectors, including AI, Bitcoin mining, and energy, raises concerns about the intersection between corporate ventures and reserve management. Public disclosures do not clarify how these activities are segregated internally.
Technology Review and Track Record
On the technology front, S&P notes that:
- •USDT has received external audits on smart contracts, with no high-severity issues found.
- •The source code is not open-source, unlike many competing stablecoins.
- •Tether has discontinued older networks and now focuses mainly on Ethereum and Tron.
Historically, Tether has maintained peg stability through several crises, including the Terra collapse (2022), FTX bankruptcy (2022), and the Silicon Valley Bank failure (2023). Its market cap has grown from 120 billion to 183 billion dollars over the past year, although its dominance relative to USDC has narrowed.
What Is Tether (USDT)?
Tether (USDT) is the world’s largest stablecoin by market capitalization. Launched in 2014, it aims to maintain a stable value by backing each token with assets held in reserve. USDT is used across exchanges, DeFi platforms, remittance channels, and cross-border trading due to its liquidity and global accessibility.
Tether is issued by Tether Holdings via entities incorporated in El Salvador. The company claims full reserve backing and publishes quarterly attestations to provide visibility into its asset base.
What Is S&P Global Ratings?
S&P Global Ratings is one of the world’s leading providers of independent credit ratings and financial analysis. The Stablecoin Stability Assessment (SSA) framework is designed to evaluate a stablecoin’s ability to maintain its peg, assessing aspects such as reserve quality, governance, transparency, liquidity, technology, and regulatory environment.
The SSA is not a credit rating. Instead, it offers insight into depegging risks and the structural resilience of stablecoins for market participants and regulators.
Conclusion
S&P’s downgrade of USDT to 5 (weak) sends a clear message: while Tether remains dominant and liquid, its growing exposure to higher-risk assets and limited transparency pose increasing concerns for long-term stability.
Whether Tether can improve its standing depends on:
- •Reducing risky asset exposure
- •Enhancing disclosure
- •Strengthening governance
- •Aligning with stricter regulatory expectations
For now, the largest stablecoin in crypto faces mounting pressure to demonstrate stronger risk management practices as competition and regulatory scrutiny intensify.