Tether Downgraded by S&P Amid Reserve Transparency Debate
S&P Global last Wednesday cut Tether’s USDT stablecoin to the lowest rating on its stablecoin stability scale, stirring renewed scrutiny over the company’s reserves and transparency.
For the crypto world, skepticism of Tether is nothing new. The dismissive term “Tether FUD” has long captured doubts that USDT might not be fully backed or could risk undercapitalization. Yet through bull markets, bear markets, and the high-profile collapses of figures like Sam Bankman-Fried and Alex Mashinsky, USDT has consistently maintained its U.S. dollar peg and redeemability. Meanwhile, Tether has grown into one of the most profitable crypto companies, generating over $10 billion in earnings in the first nine months of 2025—figures comparable to major Wall Street firms such as Goldman Sachs and Morgan Stanley.
Despite its resilience, the current bear market has attracted renewed attention from traditional finance. On the quiet trading session before Thanksgiving, S&P downgraded USDT from 4 to 5—the weakest mark on its scale. The agency cited familiar concerns about Tether’s opaque reporting and flagged a new risk: bitcoin now makes up over 5% of USDT’s reserves, meaning further BTC price drops could threaten collateralization.
Tether CEO Paolo Ardoino pushed back, saying, “We wear your loathing with pride.” He criticized traditional financial institutions, adding, “Tether has built the first overcapitalized company in the financial industry, with no toxic reserves. We are living proof that the traditional financial system is so broken it fears companies that operate differently.”
The debate spilled onto social media over the weekend after angel investor Jason Calacanis suggested Tether sell all bitcoin holdings, hold only U.S. Treasuries, and complete two independent audits by American firms. Crypto enthusiasts quickly rejected the idea, noting the impracticality of swapping a relatively small portion of BTC for government debt and recalling Calacanis’ earlier calls for bank bailouts during the Silicon Valley Bank collapse in March 2023.
Audits remain a central point of discussion. Financial blogger Quoth the Raven, once a gold advocate and now a bitcoin supporter, wrote, “When a company refuses a full, independent audit, it’s never because everything is pristine. Markets have a long, bloody track record of chewing up the naïve. An audit is the bare minimum for any entity issuing tens of billions in synthetic dollars that underpin entire markets.”
USDT continues to function as intended, but S&P’s downgrade underscores the persistent tension between crypto firms and traditional finance, highlighting ongoing scrutiny over stablecoin reserves amid volatile markets.
