Recently, international rating agency Standard & Poor's (S&P) conducted an asset quality assessment of Tether, the world's largest stablecoin issuer, and downgraded its rating to the lowest grade of "Weak." This adjustment reflects S&P's concern over the significant increase in high-risk assets within Tether's portfolio. According to S&P's report, as of the end of September this year, the proportion of high-risk assets backing Tether's stablecoin USDT had risen from 17% a year ago to 24%. These assets include corporate bonds, precious metals, Bitcoin, and secured loans. This change not only highlights Tether's aggressive approach to asset allocation but has also raised widespread doubts about the stability of stablecoins.
In its assessment report, S&P explicitly pointed out serious deficiencies in multiple key areas of Tether. First, there is insufficient transparency in its reserve asset management and risk appetite, making it difficult for investors to fully understand fund flows and potential risks. Second, Tether lacks a robust regulatory framework to govern its operations, which could lead to an inability to effectively respond to market shocks in extreme scenarios. More worryingly, S&P emphasized that Tether has not established an asset segregation mechanism, meaning that if the issuer faces bankruptcy, investors' funds may not be adequately protected, leading to losses. Additionally, Tether has not disclosed critical information such as its custodians, bank account providers, and counterparties, further increasing market uncertainty.
S&P analysts also specifically warned in the report that the rising proportion of high-risk assets like Bitcoin in Tether's portfolio could trigger a chain reaction. If the price of Bitcoin or other high-risk assets experiences a significant decline, it would directly weaken Tether's collateral coverage ratio, exposing USDT to the risk of under-collateralization. Should such a scenario occur, it would not only shake investor confidence in USDT but could also trigger systemic risks in the stablecoin market, potentially affecting the entire cryptocurrency ecosystem. S&P's assessment is based on an analysis of Tether's public data and market trends, aiming to alert investors to potential volatility.
However, Tether expressed strong opposition to this report. In a statement, the company emphasized that its stablecoin USDT has demonstrated exceptional resilience during multiple market crises, including banking crises, exchange collapses, and periods of extreme market volatility, during which USDT maintained its peg to the U.S. dollar without any decoupling. Tether also noted that since 2021, the company has begun publishing real-time reserve data and quarterly independent attestation reports, with transparency standards that even surpass those of many regulated traditional financial institutions. Tether believes that S&P's assessment fails to fully reflect its progress in risk management and compliance and calls for the market to make objective judgments based on its long-term performance.
Although Tether's response attempts to alleviate market concerns, S&P's downgrade has still sparked in-depth discussions within the industry about stablecoin regulation and asset quality. As the cryptocurrency market rapidly develops, stablecoins, serving as a critical bridge between traditional finance and digital assets, must prioritize security and transparency. This incident not only highlights the growing influence of rating agencies in the digital asset space but also reminds investors to more cautiously evaluate the asset structures and risk management capabilities of stablecoin issuers. In the future, as the regulatory environment evolves and market pressures increase, Tether and other stablecoin issuers may face stricter scrutiny and challenges.
