S&P Global Ratings downgraded USDT’s ability to maintain a 1:1 peg with the U.S. dollar to a weak rating, citing concerns that reserves include high-risk assets like Bitcoin which could become undercollateralized if values fall.

Tether’s reserves comprise bitcoin, gold, secured loans, corporate bonds and other investments with limited disclosures, heightening credit, market, interest-rate and forex risks.

The GENIUS Act, a stablecoin-focused bill signed into law, awaits regulatory rulemaking, creating a hold pattern for crypto firms and stablecoin issuers.

Bitcoin now makes up about 5.6% of USDT in circulation, exceeding the overcollateralization margin of 3.9%, signaling potential undercollateralization if asset values drop.

A large share of reserves is in short-term U.S. Treasuries and cash equivalents, but there is limited transparency about custodians, counterparties, and bank providers.

Ongoing debates persist between traditional financial oversight and crypto-focused firms over stability, transparency and investor protections in the evolving stablecoin landscape.

USDT remains dominant with a market cap around $184 billion and daily trading volume near $76 billion, underscoring its central role in crypto markets.

Tether’s holdings include substantial U.S. Treasuries and large gold reserves, prompting some analysts to view the issuer as operating like a central bank.

Tether rejected the downgrade as misleading, defending its 1:1 USD peg and citing $135 billion in Treasury holdings and $13 billion in yearly profits as evidence of stability.

Tether emphasizes its reliance on U.S. Treasury bills as a foundation for USDT while acknowledging exposure to higher-risk assets.

Tether’s representative defended the risk model on social media, calling for changes to traditional rating systems and highlighting perceived overcapitalization and profitability despite vulnerabilities.

Reserves are disclosed via attestations rather than full audits, with around 87,728 BTC reported (Bitcoin about 5.4% of total reserves), up from 3.6% previously.