Rating agency S&P Global Ratings on November 26 lowered the reliability assessment of the USDT stablecoin from the company Tether from the fourth level to the fifth, which corresponds to the lowest reliability. This was reported on the agency's website.
USDT – the largest and oldest stablecoin in circulation, pegged to the US dollar. The downgrade means that S&P doubts the token's ability to maintain that peg.
Reasons for the downgrade
S&P explained that the downgrade is linked to an increase in the share of risky assets in USDT's reserves, primarily bitcoin.
"A decline in bitcoin's price, along with a decrease in the value of other risky assets, could reduce reserve coverage and render USDT undercollateralized"
– the agency warned.
It notes that this is not USDT's only weakness. These include limited transparency in reserve management and approach to risk, a lack of a reliable regulatory framework and asset segregation, as well as restrictions on the primary redemption of USDT.
