S&P downgrades USDT stability rating to the lowest level, warning of insufficient collateral risk.

Credit rating agency Standard & Poor's Global has downgraded the rating of Tether's stablecoin USDT, which is pegged to the US dollar, to the lowest level and warned that a drop in the price of Bitcoin could lead to the stablecoin facing collateral shortage risks. It is reported that Standard & Poor's Global has downgraded the stability rating of USDT from "Constrained" to "Weak," which is the lowest level in its rating system introduced in 2023 to assess the risks of various stablecoins. Standard & Poor's Global stated that this assessment "reflects the increase in high-risk asset exposure in the USDT reserves over the past year," including Bitcoin, gold, collateralized loans, and corporate bonds, as well as limited disclosure of information. Analysts Rebecca Mun and Mohamed Damak of the agency stated in the report: "Bitcoin currently accounts for approximately 5.6% of the USDT reserve assets, exceeding the 3.9% excess collateralization ratio, meaning that its reserves may not be able to fully absorb the impact of a decline in asset value. Therefore, if the price of Bitcoin falls along with other high-risk assets depreciating, it may weaken reserve coverage and lead to collateral shortages in USDT." Stablecoins are a type of cryptocurrency designed to track the prices of other assets (usually the US dollar). The issuer typically holds reserves such as cash and short-term government debt to support its pegging mechanism. This month's sharp drop in the price of Bitcoin is expected to mark the worst monthly performance for the asset since the crypto industry crash of 2022. Additionally, Rebecca Mun and Mohamed Damak stated that information provided by Tether about the creditworthiness of its custodians, counterparties, or banking providers is limited. Other weaknesses include limited reserve management transparency, lack of asset segregation to protect against issuer bankruptcy risks, and restrictions that prevent users from redeeming USDT from Tether on a large scale. In response to Standard & Poor's Global report, Tether stated in a statement that it "strongly denies the description in the report." Tether responded: "The report uses an outdated analytical framework that does not reflect the characteristics, scale, and macroeconomic importance of digital native currencies, and overlooks data that clearly demonstrates the resilience, transparency, and global utility value of USDT." Tether also emphasized that the company has been continuously publishing quarterly independent audit verification reports since 2021 and has never refused any redemption request from verified users.