Tether Pushes Back After S&P Downgrades USDt to Lowest Stability Tier

TLDR

Table of Contents

S&P rated USDt in its lowest tier, citing liquidity and disclosure concerns.
Tether said blockchain data offers more transparency than traditional finance.
The downgrade has renewed discussions on stablecoin rules and market roles.
USDt remains the most traded stablecoin despite the rating downgrade.

Tether strongly pushed back after S&P Global Ratings placed USDt in its lowest stability tier. The company criticized the downgrade, arguing that blockchain-based assets offer more transparency than traditional finance. S&P cited concerns over liquidity and reserve clarity. The move has sparked a wider debate on stablecoin regulation, rating systems, and transparency standards as USDt remains the most traded stablecoin amid growing regulatory interest in digital asset markets.

S&P Places USDt at Lowest Tier of Stability Scale

S&P Global Ratings assigned USDt, the world’s largest stablecoin by market cap, its lowest score in a recent stability review. The rating scale measures how well a stablecoin can maintain its 1:1 peg during market stress.

The agency said the low rating was based on issues around reserve asset clarity, liquidity under pressure, and lack of standardized disclosures. S&P analysts also noted that USDt could face challenges during extreme market volatility, requiring more transparency in its financial reporting.

The move attracted attention due to USDt’s large market share in the crypto space. S&P’s stablecoin rating system is new, but its analysis already influences market perception and investor risk assessments.

Tether Responds by Defending Blockchain Transparency

Tether responded quickly and strongly, rejecting the rating and defending its operational practices. CEO Paolo Ardoino criticized S&P for using outdated models and ignoring blockchain’s real-time data capabilities.

“Tether operates in full transparency,” Ardoino said. “Traditional finance depends on quarterly reports. We operate on-chain and in real-time.” He added that the older system has slow settlements, limited visibility, and higher counterparty risks compared to stablecoins.

Tether also said it has a long track record of handling redemptions, including during volatile periods. The company claims its reserves are more transparent than many banking systems, which often keep financials private or delayed.

Debate Grows Amid Regulatory Shift in Stablecoin Sector

The S&P rating comes during a time of growing interest in global stablecoin regulation. Governments and financial institutions are reviewing how digital assets fit into existing systems. This includes how reserves are managed, disclosed, and audited.

Some regulators support rating frameworks like S&P’s as part of a broader push for accountability in the crypto space. Others in the market argue that blockchain’s transparency standards may already surpass those in traditional banking.

Analysts say the rating could shape future policy. It also arrives as several new competitors enter the stablecoin space and institutional adoption increases. This has forced market participants to rethink how stablecoins are measured and monitored.

Market Response and Ongoing Role of USDt in Crypto Liquidity

Despite the rating, USDt continues to dominate trading volumes across crypto platforms. Most traders have not reduced usage, suggesting the market had already accounted for many of S&P’s concerns.

However, the event has added pressure on stablecoin issuers to strengthen disclosures and build trust with regulators. Some platforms and investors are now comparing USDt to competitors offering daily reserve reports and regulated asset backing.

The debate around USDt’s rating and Tether’s response is expected to influence how stablecoins are regulated, rated, and perceived in global finance going forward.