Why Did S&P Global Give Tether Its Lowest Rating in 2025?

Breaking Down S&P's Scathing Critique

The rating agency zeroed in on two fundamental weaknesses:

1. Risky Reserve Composition

S&P analysts expressed alarm at Tether's growing exposure to volatile assets. While the company claims 85% of its $90 billion reserves are in "cash and cash equivalents," their quarterly attestations reveal:

• Significant Bitcoin holdings (estimated 3-5% of reserves)
• Gold and other precious metals
• Corporate bonds and secured loans

"During market stress, these assets could lose 20-50% of their value within days," warned S&P's crypto analyst team. "That's problematic when you promise 1:1 dollar redemption."

2. Transparency Gaps

Despite improved reporting compared to 2021's opaque era, S&P notes:

• Vague descriptions of private collateral
• Undisclosed counterparty risks
• No full audit by a Big Four accounting firm

As one institutional trader at BTCC told me: "We tolerate some opacity with bitcoin - it's the nature of decentralization. But for something claiming to be a dollar proxy? That's harder to swallow."

The USDC Contrast: Why Circle Scores Higher

S&P maintained Circle's USDC at "2 - Strong," highlighting stark differences:

Market Impact: More Than Just a Number

While retail crypto traders might shrug this off (USDT still trades at $0.998 as of November 28, 2025), institutional players are taking notice:

• Three Asian crypto funds announced shifts to USDC this week
• EU-based market makers now demanding 5-10% premium for USDT trades
• DeFi protocols reevaluating collateral rules

"This accelerates the 'flight to quality' we've seen since 2023's banking crisis," noted a BTCC markets analyst.

Tether's Fiery Response

CEO Paolo Ardoino didn't hold back on X (formerly Twitter):

"To S&P regarding your Tether rating: We wear your loathing with pride. The classical rating models built for legacy financial institutions historically led investors to bankrupt 'investment grade' companies."

- @paoloardoino November 26, 2025

Tether's defense hinges on:

1. Proven track record (never broke peg for >48 hours)
2. Strategic diversification benefits
3. Higher yield potential for reserve assets

What's Next for Tether and Stablecoin Users?

S&P's MOVE creates three potential pathways:

1. The Compliance Route

Tether could:

• Reduce BTC/risk asset exposure below 2%
• Undergo full quarterly audits
• Disclose counterparty details

2. The Defiant Path

Double down on current strategy, potentially:

• Increasing Bitcoin allocations
• Expanding loan business
• Embracing the "high-risk, high-reward" narrative

3. The Market Decides

As one hedge fund manager quipped: "Ratings don't break pegs - panicked users do. If Tether keeps processing redemptions, this becomes academic."

FAQ: Your Tether Rating Questions Answered

What exactly does S&P's "5 - Weak" rating mean?

It evaluates stability risks, not solvency. S&P believes USDT has higher depegging risk than competitors due to reserve quality and transparency issues.

Should I sell my USDT immediately?

Not necessarily. The rating reflects structural risks, not imminent collapse. However, institutional users may want to evaluate alternatives.

How does this affect Bitcoin markets?

Potentially significantly. If Tether reduces BTC holdings to please ratings agencies, that removes a major buyer from the market.

What stablecoins have the best ratings?

As of November 2025, USDC (2 - Strong) and EU-regulated options like EURC lead S&P's rankings.