Tether Slams S&P’s “Weakest” Stability Score, Defends $135B Treasury Holdings and $13B Profit
Introduction
The stablecoin sector, a cornerstone of the crypto economy, faces renewed scrutiny as a clash between traditional finance rating methodologies and the on-chain reality of digital assets erupts into public view. In a significant development, S&P Global Ratings has downgraded Tether’s USDT to its lowest possible stability score, citing concerns over reserve composition and transparency. The stablecoin giant, issuer of the world's largest digital dollar by market capitalization, has launched a sweeping and forceful rebuttal. Tether’s defense hinges on its colossal $135 billion exposure to U.S. Treasuries, a staggering $13 billion in profit for 2024, and its asserted role as critical financial infrastructure in emerging economies. This confrontation is more than a war of words; it is a fundamental debate over how to assess the risk and utility of a $110 billion-plus asset that operates at the intersection of decentralized finance and the global monetary system.
S&P’s Downgrade: A Deep Dive into the “Weakest” Score
S&P Global Ratings, a titan of traditional financial risk assessment, assigned USDT a stability score of 5, the lowest rank on its scale. This evaluation is part of S&P’s broader framework for analyzing stablecoins, which focuses on their ability to maintain a peg to a fiat currency. The primary drivers behind the downgrade were twofold: reserve risk and a perceived lack of full transparency.
The agency’s concern over "reserve risk" stems from Tether’s known holdings beyond ultra-safe assets like U.S. Treasury bills. While Tether has significantly increased its allocation to U.S. debt, its reserves also include other instruments such as secured loans and, notably, Bitcoin. From S&P’s perspective, exposure to a volatile asset like Bitcoin introduces an element of risk that could, in a severe market downturn, theoretically impact the backing of the stablecoin. Furthermore, the "lack of full transparency" critique points to the ongoing challenge of achieving the level of real-time, granular auditability that legacy finance institutions often demand. Despite Tether publishing regular attestation reports from a major accounting firm, these are not full-scale, quarterly audited financial statements as required for publicly traded companies, creating a gap that rating agencies view as a vulnerability.
Tether’s Forceful Rebuttal: Defending the Fortress
Tether’s response was immediate, public, and unyielding. The company labeled S&P’s downgrade as "misguided" and argued that it is based on an outdated "legacy framework" ill-suited to evaluate a digital asset like USDT. Central to its defense is an appeal to its operational track record. Tether emphatically stated that USDT "has never failed a redemption," even during periods of extreme market stress such as the Terra/LUNA collapse in 2022 and the FTX implosion later that year. During these crises, while other algorithmic and centralized stablecoins buckled, USDT maintained its peg and processed billions of dollars in redemptions without default. Tether positions this real-world performance as the ultimate stress test, one it has passed repeatedly.
The core of Tether’s argument rests on three formidable pillars: its Treasury holdings, its profitability, and its systemic utility.
The $135 Billion Treasury Argument: A Global Financial Player
Perhaps the most powerful statistic in Tether’s arsenal is its exposure to U.S. Treasury bills. At $135 billion, Tether claims a position among the top global holders of U.S. government debt. This is not merely a claim of solvency but one of deep integration into the bedrock of the global financial system. By holding such a massive volume of U.S. sovereign debt, Tether argues it is acting as a significant source of demand for U.S. government financing, effectively becoming a non-bank financial institution of systemic scale.
This argument reframes the conversation from one about a niche crypto product to one about a major participant in traditional capital markets. The implication is that an entity holding this magnitude of the world's premier safe-haven asset cannot be lightly dismissed as "high risk." Tether uses this fact to counter S&P's reserve risk assessment directly, suggesting that the sheer scale and quality of its primary reserve asset fundamentally undercuts the agency's concerns.
Profitability as Proof of Strength: The $13 Billion Figure
Beyond the composition of its reserves, Tether points to its profitability as undeniable evidence of its financial health and operational efficiency. The company cited an "over $13 billion in profit in 2024 and $10 billion year-to-date in 2025." These figures are colossal by any standard, dwarfing the profits of many established traditional finance and tech companies.
This profitability serves multiple purposes in Tether’s narrative. First, it demonstrates that the business model—primarily earning yield on its reserve assets—is not only sustainable but extraordinarily lucrative. Second, this profit is largely retained within the company's equity, further fortifying its capital buffer against potential losses. Tether argues that this growing equity cushion enhances its ability to absorb volatility in any non-Treasury assets it holds, such as Bitcoin, thereby making the entire operation more resilient. In essence, they present profitability not as an end in itself, but as a key metric of systemic strength and risk-bearing capacity.
USDT’s Global Utility: Beyond Speculation to Infrastructure
A critical part of Tether’s rebuttal moves beyond balance sheets and into the realm of real-world impact. The company underscored USDT’s "global role as financial infrastructure in emerging markets like Türkiye and Nigeria." This highlights a function for stablecoins that often goes underappreciated in Western financial analysis.
In countries suffering from hyperinflation, currency controls, or underdeveloped banking systems, USDT offers a stable store of value and a medium for cross-border remittances and trade that is often faster and cheaper than traditional channels. In these contexts, USDT is not primarily a tool for crypto speculation but a vital piece of economic infrastructure. By emphasizing this utility, Tether attempts to shift the narrative away from S&P’s narrow risk metrics toward a broader view of its societal and economic value—a value that persists regardless of a rating agency's opinion.
CEO Paolo Ardoino’s Provocative Stance: “We Wear Your Loathing With Pride”
The corporate response was given a sharp personal edge by Tether CEO Paolo Ardoino. He publicly dismissed the S&P rating as "legacy finance propaganda," framing the conflict as an ideological battle between an innovative, disruptive force and an entrenched, obsolete system. His statement, “We wear your loathing with pride,” is a deliberate act of defiance, positioning Tether as an outsider challenging the establishment.
Ardoino also issued a direct challenge to S&P, urging them to assess USDT using "transparent, on-chain data rather than outdated models." This points to a fundamental schism in methodology. The crypto industry prides itself on transparency through public blockchains where every transaction is verifiable. Ardoino’s argument is that this real-time, immutable data should be the primary source for risk assessment, not models designed for opaque, quarterly-reported traditional corporations.
A Comparative Glance: The Evolving Stablecoin Landscape
While this event focuses squarely on Tether and USDT, it occurs within a diverse and competitive stablecoin ecosystem. Rival stablecoins like Circle’s USDC have often pursued a strategy more aligned with traditional finance expectations, including greater transparency efforts and regulatory outreach. USDC has historically maintained a reserve composition almost exclusively in cash, cash equivalents, and U.S. Treasury bonds.
This difference in strategy has led to varying perceptions. Entities prioritizing compliance and familiarity with traditional frameworks may show a preference for stablecoins like USDC for certain institutional applications. However, USDT’s dominance in trading pairs on both centralized and decentralized exchanges and its deep penetration in emerging markets give it a liquidity and network effect advantage that remains largely unchallenged. This event underscores that there is no single path to success or perception in the stablecoin market; different assets can serve different niches and adhere to different philosophies while coexisting.
Strategic Conclusion: A Clash of Paradigms with Lasting Implications
The confrontation between Tether and S&P Global Ratings is far more than a simple disagreement over a score. It represents a fundamental clash between two different paradigms for evaluating financial soundness: one based on established models and disclosure standards from traditional finance, and another rooted in operational track records, on-chain transparency, and real-world utility within the digital asset space.
For crypto readers and market participants, this event reinforces several key points:
- The Scrutiny is Here to Stay: As stablecoins grow in size and importance, they will attract increasing attention from regulators, rating agencies, and traditional financial institutions.
- Performance Trumps Perception (For Now): Despite the negative rating from S&P, USDT’s market dominance suggests that its historical performance during crises currently holds more weight with users than a theoretical risk score.
- Transparency Remains the Central Battleground: The debate will continue to revolve around what constitutes adequate transparency—regular attestations versus full audits—and who gets to set that standard.
What to Watch Next: The crypto community should monitor whether this downgrade has any tangible impact on USDT’s adoption by large institutions or its integration with traditional finance payment rails. Furthermore, observers should watch for responses from other major rating agencies and whether Tether makes any strategic shifts—such as pursuing a full audit—to bridge the perception gap with the traditional financial world. The outcome of this clash will help shape the future regulatory and operational landscape for all stablecoins.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.