Tether CEO Criticizes S&P Global After USDT Rating Downgrade

The recent downgrade of Tether's USDT stablecoin to a "weak" rating by S&P Global has sparked strong responses from Tether's CEO. The downgrade was attributed to concerns over limited transparency and rising exposure to high-risk assets like Bitcoin.

Key Takeaways

Tether's USDT stablecoin was downgraded from “constrained” to a “weak” rating by S&P Global due to limited disclosure and high-risk asset exposure.
Tether CEO Paolo Ardoino views the rating as an attack on the company for exposing flaws in the traditional financial system.
The downgrade may jeopardize USDT’s ability to maintain its peg to the US dollar during market fluctuations.
Tether's reserves are primarily held in short-term Treasury bills and cash-equivalent assets, but also include Bitcoin and gold.

Tether USDT
Source: S&P Global Ratings

According to the rating agency, the downgrade suggests USDT may face difficulties keeping its value stable against the US dollar in the event of wider market changes. There is potential for a better rating in the future if Tether increases transparency and reduces its risk exposure.

Tether CEO

Response from Tether’s CEO

The negative rating did not sit well with Tether's CEO, Paolo Ardoino, who asserted that S&P Global was reacting to the company’s growing investments in gold and Bitcoin. He contended that Tether’s choices highlight the shortcomings of the current financial system, and criticized S&P for its perceived bias against Tether. Ardoino boldly stated, “We wear your loathing with pride. Tether is living proof that the traditional financial system is so broken that it’s becoming feared by the emperors with no clothes.”

Tether
Source: X

Echoing Ardoino’s sentiments, Chris Pavlovski, CEO of Rumble, described the downgrade as a "striking attack on Tether” for its challenge to the traditional financial landscape. Tether is currently the leading issuer of stablecoins, with its flagship USDT achieving a market supply of $184 billion, marking an impressive growth of $44 billion in just one year. Since USDT is an offshore product, it does not fall under U.S. stablecoin regulations that mandate a full 1:1 backing with government bonds or cash equivalents. However, Tether's U.S.-based stablecoin, USAT, will need to comply with these standards and enhance its transparency, as noted by analyst Novacula Occami. Critics like Occam’s Razor pointed out that the downgrade reflects concerns over Tether’s transparency and auditing processes rather than USDT itself.

Understanding Tether’s Reserves

Tether disclosed that 77% of the reserves supporting USDT are in short-term Treasury bills and cash-equivalent assets, while the remaining portion is allocated to Bitcoin, gold, and secured lending positions.

Tether
Source: S&P Global Rankings

Notably, Tether ranked as the largest independent buyer of gold in Q3, competing with central banks worldwide. The firm continues to expand its investments in infrastructure, data, AI, and energy as part of its long-term strategy.