S&P Calls Tether 'Weak' — Meanwhile It's Buying More Gold Than Central Banks

Core Viewpoint - Tether (USDT) has received a low stability score from S&P Global while simultaneously increasing its gold reserves, raising questions about its financial stability and strategic positioning in the evolving monetary landscape [1][2][4]. Group 1: S&P Global Assessment - S&P Global downgraded Tether's stability score from 4 (constrained) to 5 (weak), citing a shift in reserve composition towards riskier assets such as Bitcoin, gold, secured loans, and corporate credit [2]. - Bitcoin now constitutes approximately 5.6% of USDT in circulation, surpassing the 3.9% overcollateralization margin, indicating potential vulnerability during price downturns [2]. - Additional structural weaknesses noted include limited disclosure, lack of asset segregation for insolvency protection, absence of regulatory frameworks, and constraints on primary redemption [3]. Group 2: Tether's Gold Purchases - Tether purchased 26 tonnes of gold in the last quarter, surpassing purchases by several sovereign nations, including Kazakhstan, Brazil, Turkey, and Iraq [3]. - With an estimated total of 116 tonnes of gold, Tether has become the largest independent holder of physical gold, comparable to the national reserves of South Korea and Hungary [3]. Group 3: Market Implications - The contrasting narratives surrounding Tether suggest it is either a risky and opaque entity or strategically positioning itself for a potential shift in the monetary system where Bitcoin and gold may play a more significant role alongside reserve currencies [4][5]. - The situation presents a dichotomy where either S&P's concerns are valid, indicating instability, or Tether is proactively preparing for a transformative financial environment [5].