‘We wear your loathing with pride:’ Why S&P downgraded Tether after it bought more gold than any country

Tether, the issuer of the USDT stablecoin, has spent the past year accumulating Bitcoin and gold at a pace that puts it on par with several sovereign treasuries.

For context, the firm purchased more gold than every central bank combined over the last quarter alone, pushing its total holdings to 116 tons of physical bullion.

Tether’s Gold Accumulation (Source: Financial Times)

Yet the build-up has not impressed traditional finance.

On Nov. 26, credit rating firm S&P Global downgraded its assessment of USDT’s ability to maintain its dollar peg to a 5, the lowest score in its stablecoin rating structure.

The agency pointed to rising allocations to Bitcoin, secured loans, and other higher-risk instruments, and said these exposures create uncertainty around reserve liquidity. In S&P’s view, these assets’ accumulation sits outside the simple, dollar-denominated model that a stablecoin reserve should reflect.

The result is an unusual split. Tether is buying assets that central banks have used for centuries to signal financial strength. S&P has concluded that the mix weakens the stablecoin’s reliability.

Why S&P took this position on Tether USDT

S&P’s downgrade rests on concerns about liquidity and reserve clarity rather than about asset quality. The agency’s model evaluates whether a stablecoin issuer can meet redemptions quickly and without friction during periods of market stress.

According to the firm, Tether’s increasing allocation to Bitcoin and secured loans introduces price volatility and counterparty exposure. The firm holds approximately $10 billion in BTC and has around $15 billion in secured loans, according to its latest quarterly attestation report.

At the same time, gold is also central to its reserves, with roughly $13 billion in assets. The precious metal, while a hard asset with long-term value, is harder to liquidate on short notice and cannot settle a large redemption as easily as a Treasury bill can.

Tether’s USDT Stablecoin Reserve (Source: S&P 500)

Considering this, S&P’s view is that the reserve mix has become less suited to a product that promises instant one-for-one redemption.

The agency also highlighted gaps in disclosure. It noted:

Moreover, Tether does not publish detailed information on custodians, counterparties, or the composition of its money-market exposures.

These omissions matter because the quality of those institutions directly affects the reliability of reserves.

Even though Tether’s US Treasury holdings exceed $130 billion, making it one of the largest holders globally, the lack of transparency into its operational plumbing limits S&P’s confidence.

Notably, Tether has defended its approach in the past by presenting a different macro thesis.

Paolo Ardoino, the firm’s chief executive officer, has argued that Bitcoin, gold, and land are long-term hedges against global instability and the erosion of sovereign balance sheets.

The company has backed that view with investments in mining and royalty companies, a growing tokenized-gold business, and partnerships to offer vault services and collateralized lending tied to gold.

In a direct response to S&P’s downgrade, Ardoino said,

From Tether’s standpoint, these moves strengthen the corporate balance sheet even if they deviate from the conventional stablecoin reserve model.

Why the crypto market does not care

Meanwhile, the market’s interpretation of Tether differs sharply from S&P’s framework.

This is because USDT has maintained its dollar peg across ten years of market cycles, including collapses in exchanges, lenders, and rival stablecoins. That track record shapes user trust more than a formal rating ever could.

Moreover, USDT’s liquidity on global trading venues is deep. The digital asset remains the base pair for much of crypto trading and is widely used for payments in emerging markets that lack stable access to the dollar.

As a result, the stablecoin’s demand continues to rise, and USDT’s market capitalization is at an all-time high of more than $184 billion.

Tether USDT Market Capitalization (Source: DeFiLlama)

Meanwhile, the most significant feature of Tether’s balance sheet is its earnings power. With more than $130 billion in short-term US bills, the stablecoin issuer earns about $15 billion a year.

That yield creates a rapidly growing equity cushion that can absorb price swings in Bitcoin or secured loans more effectively than standard risk models assume.

For traders and emerging-market users, these details matter more than S&P’s view of asset mix. The market sees a company with substantial US Treasury exposure, a rising gold reserve, a profitable business model, and a stable redemption mechanism.

So, even if part of the reserve is allocated to volatile assets, the scale of Tether’s retained earnings provides a buffer that would be unusual for a regulated bank.

Indeed, Ardoino underlined the extent of the firm’s innovation in an X post, saying that Tether has developed what he described as an overcapitalized business with no impaired reserves, and that it remains highly profitable.

He also added that Tether’s performance highlights weaknesses in traditional finance, which he said is increasingly unsettled by the company’s model.

He added:

Transparency still matters

Still, none of this removes the need for clearer disclosures.

The main vulnerability in Tether’s structure is not its gold allocation or its Bitcoin exposure. It is the lack of detailed insight into how the reserves are custodied, how counterparties are selected, and how secured loans are managed.

Even a balance sheet supported by significant equity buffers and hard assets is harder to evaluate without transparent reporting.

For institutional users and regulators, this is the central unresolved issue.

Thus, greater visibility would reduce uncertainty for large holders and align USDT with the standards expected of a global settlement asset.

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