S&P Global Ratings has downgraded its assessment of Tether’s ability to maintain the USDT stablecoin’s one-to-one peg with the U.S. dollar, moving it from “constrained” to “weak” in its latest report published on 26 November 2025. The agency highlighted a sharp rise in riskier assets held in Tether’s reserves and ongoing shortcomings in transparency.
The report notes that USDT, the world’s largest stablecoin by circulation, now has 24 percent of its reserves in assets such as bitcoin, gold, corporate bonds and secured loans, up from 17 percent a year earlier. According to S&P, bitcoin alone accounts for roughly 5.6 percent of USDT in circulation, exceeding the 3.9 percent overcollateralization buffer implied by Tether’s latest attestation. A significant decline in the value of bitcoin or other high-risk assets could therefore leave USDT undercollateralized.
Transparency concerns and governance risks
S&P Global also raised concerns about the issuer’s opacity. The report highlights a lack of detailed disclosure on custodians, counterparties and the composition of Tether’s money-market fund investments. While the company publishes quarterly reserve updates attested by BDO Italia, the disclosure frequency is less robust than peer stablecoins that release monthly reports. The rating agency also pointed to the absence of asset segregation, meaning customer assets may not be protected if the issuer becomes insolvent.
Tether’s recent strategic expansion into artificial intelligence, energy infrastructure and other sectors further complicates oversight. S&P argued that the company has not clearly defined its risk appetite or reserve-management policies, leaving investors with limited visibility into how the portfolio might respond to market shocks.
Low-risk assets still dominate, but vulnerabilities remain
Despite these weaknesses, S&P noted that 75 percent of Tether’s reserves remain invested in short-term U.S. Treasury bills and overnight reverse repos, which it classifies as low-risk assets. Tether’s Treasury holdings exceed 130 billion dollars, placing it among the world’s largest holders of U.S. government debt. However, the decline in overcollateralization, combined with growing exposure to volatile assets, ultimately led the agency to assign USDT the lowest score on its 1–5 scale.
Implications for Europe and global stablecoin oversight
The downgrade comes at a time when European policymakers are tightening scrutiny under MiCA and seeking to contain financial-stability risks associated with global stablecoins. The European Central Bank has repeatedly warned that reliance on dollar-denominated tokens such as USDT could undermine Europe’s monetary autonomy, a concern linked to its broader push to develop a digital euro.
For institutions operating in Europe, S&P’s warning may amplify calls for more rigorous reserve standards, fuller disclosure and stricter regulatory enforcement for non-EU stablecoin issuers. The assessment also adds fresh pressure on Tether, which has long faced criticism over transparency despite its dominant market position.