Have you ever watched a legacy institution try to judge something it fundamentally doesn’t understand? That’s exactly what unfolded this week when one of the biggest names in traditional credit ratings took aim at the world’s largest stablecoin – and got an earful in return.
I’m talking about S&P Global Ratings handing Tether’s USDT a score so low it barely qualifies as passing. And Tether’s CEO? He didn’t just take it lying down. He came out swinging on social media, turning what could have been a quiet report into one of the spicier crypto moments of the month.
Honestly, moments like these are why I still get excited about this industry. It’s not just about price charts and memes anymore – it’s about watching two completely different financial worlds collide in real time.
The Rating That Started a Firestorm
Let’s start with the cold, hard facts. S&P Global Ratings dropped a new stablecoin stability assessment, and when they got to Tether, they weren’t kind. On their five-point scale – where 1 is “very strong” and 5 is basically “don’t touch this with a ten-foot pole” – USDT scored a 5. Yes, the lowest possible mark.
Their reasoning? Two main issues that kept coming up throughout the report:
- Persistent gaps in disclosure and transparency
- Growing exposure to what they classify as high-risk assets
Now, to be fair, these aren’t new criticisms. People have been raising eyebrows about Tether’s reserve composition for years. But seeing it laid out so bluntly by one of the “big three” rating agencies? That hits different.
What Exactly Is in Those Reserves?
Here’s where things get interesting. Yes, the majority of Tether’s reserves – the vast majority, actually – are in short-term U.S. Treasury bills and cash equivalents. That’s the boring, safe stuff that traditional finance loves.
But there’s also this growing slice of the pie that includes Bitcoin, gold, secured loans, and corporate bonds. And according to S&P, Bitcoin alone now makes up about 5.6% of reserves backing circulating USDT. That’s actually higher than Tether’s stated overcollateralization buffer of around 3.9%.
Do the math, and you can see why eyebrows are raised. If Bitcoin drops hard – which, let’s be honest, it does sometimes – that could theoretically eat through the entire excess collateral buffer. Suddenly, a stablecoin that’s supposed to be rock-solid starts looking a little less stable.
“Declines in Bitcoin’s value or other high-risk assets… could result in the stablecoin becoming undersecured.”
– From the S&P Global report
Paolo Ardoino’s Nuclear Response
And this is where it gets good.
Tether CEO Paolo Ardoino didn’t issue some carefully lawyered press release. He didn’t schedule a polite interview. He went straight to X (formerly Twitter) and let loose.
His opening line? “We wear your loathing with pride.”
I mean, come on. That’s not a CEO response. That’s a mic drop.
“The classical rating models built for legacy financial institutions historically led private and institutional investors to invest their wealth into companies that despite being attributed investment grade…”
– Paolo Ardoino, basically calling out the entire ratings industry
He went on to point out something that honestly needed saying: the same rating agencies that are now clutching pearls about Tether’s Bitcoin exposure are the ones that gave AAA ratings to mortgage-backed securities right before 2008. The ones that rated companies like Enron as safe investments weeks before they imploded.
In Ardoino’s view – and I have to say, he’s not entirely wrong here – Tether represents something fundamentally different. It’s the first truly overcapitalized company in crypto, profitable without leverage or “toxic reserves,” operating in a way that traditional financial models simply weren’t built to evaluate.
The Transparency Question Nobody Can Fully Answer
Let’s be real for a second though – the transparency criticism isn’t coming out of nowhere.
Even Tether’s biggest supporters have to admit that getting clear, detailed information about exactly who holds the reserves, what the counterparties look like, and how everything is structured… well, it’s not always straightforward. The company provides attestations, sure. They release reserve reports. But it’s not the same level of granular disclosure you’d get from, say, a Circle or a major bank-issued stablecoin.
S&P specifically called out limited transparency regarding:
- The financial stability of custodians
- Counterparty risk profiles
- Banking partner relationships
These are legitimate concerns. In a world where we’ve seen crypto lenders collapse because of hidden counterparty risk (remember Three Arrows? Alameda?), these questions matter.
But Is the Criticism Actually Fair?
Here’s where I start to have mixed feelings.
On one hand, yes – more transparency would be better. Always. Nobody reasonable is arguing against that.
On the other hand, let’s look at the actual track record. USDT has maintained its peg through:
- The 2022 crypto winter
- Multiple bank runs on crypto exchanges
- Regulatory attacks from multiple jurisdictions
- Constant FUD and criticism for years
Through all of that, people have been able to redeem USDT at $1. Not $0.99. Not $0.95. One dollar.
Meanwhile, some of the “safer” alternatives have had their own issues. Remember when USDC dropped to $0.87 during the Silicon Valley Bank crisis? That was a circle-issued stablecoin backed entirely by cash and Treasuries – exactly what S&P wants to see more of.
Actions speak louder than ratings, and Tether’s actions have been maintaining that peg through hell and high water.
The Bigger Picture: Two Financial Worlds Colliding
Perhaps the most interesting aspect of this whole situation – and I genuinely believe this – is what it reveals about the growing tension between traditional finance and crypto-native companies.
S&P isn’t wrong to apply their framework. That’s their job. They’re looking at Tether through the same lens they use for banks, money market funds, and other traditional financial institutions.
But Tether isn’t a bank. It isn’t a money market fund. It’s something new – a crypto-native stablecoin issuer that’s profitable, overcollateralized, and has survived everything the market has thrown at it.
The rules that work for evaluating JPMorgan or BlackRock’s money market funds might not be the right rules for evaluating something that exists entirely outside that system.
“Tether as the first overcapitalized company in the industry, asserting it operates without toxic reserves while maintaining profitability.”
When Ardoino says they’re operating in a different paradigm, he’s not just being defensive. There’s truth there.
What Would Actually Move the Needle?
S&P was actually pretty clear about what could improve the rating:
- Reduce exposure to high-risk assets (particularly Bitcoin)
- Provide significantly more detailed information about reserves and partners
- Improve governance and transparency practices to match top competitors
Some of this seems reasonable. Some of it… well, let’s be honest, Tether getting rid of Bitcoin exposure entirely? That’s about as likely as Bitcoin itself going away.
The Bitcoin allocation isn’t some accident. It’s a deliberate treasury management strategy – using a portion of profits to hold an asset that has historically outperformed pretty much everything else. From Tether’s perspective, holding some Bitcoin might actually be the responsible thing to do with excess capital.
Different risk tolerance. Different time horizons. Different everything.
The Market Doesn’t Seem to Care
Here’s the wild part: while all this drama was unfolding, what was USDT actually doing?
Holding steady at $1. Market cap continuing to grow. Trading volumes completely unaffected.
The market has spoken, and it doesn’t seem particularly concerned about S&P’s rating.
This isn’t the first time Tether has faced criticism from traditional institutions, and it almost certainly won’t be the last. But each time, the outcome has been the same: USDT keeps growing, keeps maintaining its peg, keeps being the liquidity backbone of crypto trading worldwide.
Where Do We Go From Here?
In my view – and I’ve been watching this space for years – this incident reveals more about the growing pains of institutional adoption than it does about Tether specifically.
Traditional finance is trying to understand crypto using tools and frameworks built for a completely different world. Crypto companies are building something new that doesn’t always fit neatly into those old categories.
Neither side is entirely wrong. Neither side is entirely right.
The truth, as always, is somewhere in the messy middle.
Tether could probably stand to be more transparent. S&P could probably stand to update their models for crypto-native companies. Both things can be true at the same time.
In the meantime, USDT remains the 800-pound gorilla of the stablecoin world, whether traditional rating agencies like it or not.
And honestly? Watching these worlds collide is one of the most fascinating parts of being in crypto right now.
Because make no mistake – this isn’t just about one stablecoin and one rating agency.
This is about what happens when an entirely new financial system starts growing up alongside the old one.
Sometimes they cooperate. Sometimes they compete. And sometimes?
Sometimes the CEO of the crypto company tells the rating agency to shove it, and we all get to watch the fireworks.
Pass the popcorn.
