Tether CEO Responds to S&P’s Low Stablecoin Rating

Tether's CEO, Paolo Ardoino, has spoken out against S&P Global Ratings after the agency assigned a low stability score to the company's stablecoin, highlighting issues with transparency and high-risk reserves.

Key Takeaways

S&P Global Ratings assigned Tether’s stablecoin a low stability score of “5 (weak)” due to issues in transparency and high-risk asset reserves.
Reserves in Question: The reserves include Bitcoin, gold, secured loans, and corporate bonds.
Ardoino’s Response: He criticized traditional rating models, claiming they mislead investors, and defended Tether's operations as unique compared to conventional finance.
Rating Factors: S&P stated that a decline in Bitcoin's value or other high-risk assets could jeopardize the stablecoin's backing.
Future Improvement: Tether could improve its rating by minimizing high-risk asset exposure and enhancing transparency.

Tether's CEO Responds to the S&P Report

In a statement made on the social media platform X, Ardoino expressed his displeasure with S&P Global Ratings, which recently gave Tether’s stablecoin its lowest rating. He quipped, “We wear your loathing with pride,” referring to the agency's negative assessment.

S&P Global Ratings awarded Tether a score of “5 (weak)” on its five-point stability scale. According to their analysis, the primary reasons for this rating were “persistent gaps in disclosure” and an increasing amount of “high-risk assets” included in Tether’s reserves.

The report from S&P mentioned that the reserves in question involve assets such as Bitcoin, gold, secured loans, and corporate bonds. The agency concluded that Tether's transparency and governance practices are lacking when compared to other stablecoins in the market.

Ardoino replied to these concerns by noting that Tether embraces any criticism and characterized the low rating as indicative of the traditional finance sector’s struggles to understand a company that operates outside of established financial systems. He emphasized that Tether is the first overcapitalized company in the stablecoin space, asserting it does not hold risky reserves and remains profitable.

According to S&P’s report, Bitcoin accounts for around 5.6% of Tether's circulating stablecoin, surpassing the company’s 3.9% overcollateralization buffer. The agency warned that if Bitcoin or any of the other high-risk assets—including corporate bonds, precious metals, or secured loans—see a decline in value, Tether's stablecoin could find itself undersecured.

The report indicated that a significant portion of Tether’s reserves is made up of short-term U.S. Treasury bills and other cash equivalents denominated in dollars.

Furthermore, S&P pointed out that Tether provides limited insight into the financial stability of its custodians, counterparties, and banking partnerships, which has contributed to its low rating. They noted that the rating could improve if Tether reduces its reliance on high-risk assets while also offering more comprehensive information about its reserves and operational partners.

Despite the recent rating, Tether continues to hold its position as the largest stablecoin in terms of market capitalization.