S&P Downgrades Tether to Lowest Rating as Bitcoin Holdings Exceed Safety Buffer
S&P Global Ratings downgraded Tether's USDT stablecoin to its weakest stability rating, citing rising exposure to volatile assets and warning that the stablecoin no longer has sufficient buffer to absorb a decline in Bitcoin's value.
The ratings agency lowered USDT's assessment to 5, or "weak," from 4, or "constrained," on Wednesday. Bitcoin now represents 5.6% of USDT in circulation, exceeding the roughly 3.9% reserve buffer implied by Tether's latest third-quarter attestation, S&P said.
The downgrade reflects concerns that high-risk assets now account for 24% of Tether's $181.2 billion in reserves backing $174.4 billion in circulating USDT, up from 17% a year ago. These assets include Bitcoin, gold, secured loans valued at over $14 billion, corporate bonds, and other investments subject to credit and market risks.
A material drawdown in bitcoin, especially if combined with losses in other high-risk holdings, could leave USDT undercollateralized, S&P warned. The agency also cited persistent gaps in disclosure about custodians, counterparties, and detailed asset composition.
Tether CEO Paolo Ardoino rejected the assessment, writing on X that the company wears S&P's criticism "with pride." He argued that traditional rating models built for legacy financial institutions have historically failed, pointing to investment-grade companies that later collapsed.
"Tether instead built the first overcapitalized company in the financial industry, with no toxic reserves. And yet is and remains extremely profitable," Ardoino wrote, calling the traditional financial system "broken."
The company said in a statement that USDT has maintained stability through banking crises, exchange failures, and extreme market volatility over its decade-long history.
Despite the S&P downgrade, USDT remains the dominant stablecoin with a market cap exceeding $184 billion – more than double Circle's USDC at under $75 billion. The stablecoin has maintained its $1 peg throughout recent market volatility.
Tether's reserves include $135 billion in U.S. Treasury bills, with the company now among the largest global holders of U.S. government debt. Its overall collateralization ratio stands at 103.9%, with reserves exceeding liabilities by $6.8 billion.
Gold Holdings Rival Central Banks
Tether acquired 26 tonnes of gold in Q3, more than any central bank during the same period, according to analysis by investment bank Jefferies, the Financial Times reported earlier this week. By the end of September, the company held approximately 116 tons of gold, valued at roughly $12.9 billion.
If it were a central bank, Tether's gold reserves would rank among the top 30 globally, ahead of Greece, Qatar, and Australia. The holdings include about 12 tonnes backing its tokenized gold product XAUT, with the remaining 104 tons supporting USDT reserves. Gold now comprises roughly 7% of Tether's total reserves.
CEO Ardoino stated in September that Tether will continue investing profits into "safe assets like Bitcoin, Gold, and Land" as the world grows darker. The company has also invested $100 million in mining royalties firm Elemental Altus.
Bloomberg reported earlier this month that Tether recruited two senior metals traders from HSBC to bolster its precious metals operations. Vincent Domien, HSBC's global head of metals trading and a London Bullion Market Association board member, and Mathew O'Neill, who leads precious metals origination for Europe, the Middle East and Africa, are both completing notice periods before joining Tether.
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