S&P downgrades Tether to lowest rating

Core Viewpoint - S&P Global Ratings has downgraded Tether (USDT) to "5 (weak)", the lowest rating on its stablecoin risk scale, citing concerns over disclosure and high-risk assets in Tether's reserves [1][2]. Group 1: Rating Downgrade - S&P Global Ratings issued a downgrade of Tether to "5 (weak)", marking the lowest grade on its five-point stablecoin risk scale introduced in 2023 [1]. - The agency highlighted "persistent gaps in disclosure" and an increasing proportion of "high-risk assets" in Tether's reserves, which include bitcoin, gold, corporate bonds, and secured loans [2]. - S&P noted that these high-risk assets carry various risks, including credit, market, interest-rate, and foreign-exchange risks, and mentioned limited insight into the creditworthiness of Tether's custodians and counterparties [2]. Group 2: Tether's Response - Tether's CEO, Paolo Ardoino, criticized S&P's assessment, suggesting that the agency's methodologies are outdated and were responsible for misrating traditional financial institutions that later failed [4][5]. - Ardoino argued that Tether's reserve structure is fundamentally different from those of traditional banks and insurers, asserting that Tether's model is "overcapitalized" compared to institutions rated by legacy agencies [5]. - In response to the downgrade, Tether expressed strong disagreement with S&P's characterization, emphasizing its history of maintaining stability and redeemability of USDT during various financial crises [7].