S&P Global may have somewhat surprised the stablecoin sector this past week after cutting Tether’s rating to “weak,” citing persistent disclosure gaps and structural opacity across its reserves. The downgrade appears have put fresh scrutiny on the world’s largest stablecoin, Tether (USDT), and analysts at several digital-asset research desks are looking into the underlying factors driving the move.
Their early read indicates a mix of regulatory pressure, liquidity concerns, and seemingly long-standing transparency issues, and they are outlining what this shift could potentially mean for market stability in the weeks ahead.
Jake Kennis, research analyst at Nansen said:
“Despite the downgrade, USDT remains fully collateralized with redemptions, its peg mechanism, and it’s liquidity profile functioning normally. The assessment cites Tether’s increased allocation to BTC and gold as “higher-risk” assets, along with limited visibility into the credit quality of certain counterparties. We’re not taking a view on those specific claims, but strictly from an onchain perspective, USDT continues to behave like the most liquid stablecoin.”
Onchain data shows the peg holding quite firmly, “24h volumes above $85B, and no meaningful outflows from exchanges or indications of heavy redemption pressure.”
In short, market behavior suggests “participants are largely dismissing the downgrade and continue to treat USDT as reliably redeemable at 1:1 which is consistent with its historical performance through past periods of stress.”
Sharing perspectives from two of the most active operators in the stablecoin economy (Eco and Fireblocks) on S&P’s new assessment of USDT. Both note that the downgrade leans heavily on hypothetical modeling that doesn’t align with how USDT actually behaves under stress or how institutions use it today.
Ryne Saxe, CEO of Eco said:
“S&P assigns outsized weight to the presence of Bitcoin and other non-USD assets, yet the actual market behavior of USDT doesn’t necessarily support that level of modeled risk. The token has held redemptions and stability through far more severe Bitcoin drawdowns than anything reflected in the report, which makes the downgrade feel more theoretical than empirical.”
Ran Goldi, SVP of Payments and Network at Fireblocks shared:
“Stablecoins now underpin payments and treasury flows for institutions, corporates, fintechs, and even governments. The S&P downgrade reflects a model of reserve and disclosure risk, not a change in USDT’s ability to settle or redeem 1:1. It evaluates hypothetical volatility in a small part of the reserves, not the redemption mechanics these organizations rely on for cross-border settlement, payouts, and on-chain treasury. For them, it’s business as usual.”
It’s worthwhile to note that the latest assessment from S&P Global may not necessarily be valid or even reliable in pure statistical methodology terms. The ratings may largely be based on traditional financial system models and cannot accurately capture the more dynamic and evolving nature of the crypto and web3 space.
In the past, especially during its early years, Tether’s USDT stablecoin was heavily scrutinized because the stablecoin issuer’s reserves were not being held in the most transparent manner. Since that time, Tether‘s business model has improved and the company even ranks among the world’s leaders in terms of recent gold purchases. In fact, Tether may have bought more gold during these past few months than the central banks of many nations.
Tether is also not operating in a vacuum. Clearly, its USDT stablecoin and various other products are now part of a very active crypto trading, staking, and investing ecosystem. It is quite possible that the ratings assigned by S&P Global may change over time and after Tether becomes even more firmly entrenched in fast-maturing crypto space, it may potentially receive improved ratings / assessments.
Despite the downgrade, the stablecoin seemingly remains unaffected and continues to maintain its 1 to 1 peg with the US dollar. Other stablecoins like Circle’s USDC has also become a trusted way to transact in the cryptocurrency and blockchain space. And even though S&P Global issued its downgraded rating, it is still interesting how these digital assets have become significant enough in a short period of time to gain the attention of mainstream financial services providers.