S&P Global has downgraded the stability rating of the Tether stablecoin. What is wrong with the token?
Analysts at S&P Global Ratings downgraded the stability rating of the USDT steiblcoin from "limited" to the minimum - "weak". The reason for the agency called the growing share of high-risk assets in the reserves of the issuer of the token - the company Tether. Tether's assets are held in bitcoin, gold and corporate bonds. S&P Global warned that the falling bitcoin price could lead to insufficient collateralization of the token.
"Bitcoin's share of the USDT is now around 5.6%, which exceeds the 3.9% collateralized reserve ratio. This means that the reserves are no longer able to fully compensate for a possible drop in the value of bitcoin," the analysts at S&P Global Ratings wrote.
S&P also pointed out that Tether provides limited information on the credit quality of its custodians, counterparties and servicing banks. Other vulnerabilities included a lack of transparency in reserve management, a lack of asset segregation in the event of issuer bankruptcy, and limitations in buying USDT directly from Tether.
What Tether responded
"Tether strongly disagrees with the conclusions of the report, which is based on an outdated methodology that fails to take into account the nature, scale and macroeconomic significance of digital currencies," Bloomberg quoted the USDT issuer as saying in a commentary. - In addition, the report ignores data demonstrating the sustainability, transparency and global relevance of USDT." The company also reminded that independent quarterly reserve confirmations have been published since 2021 and no redemption request from a verified user has been rejected.
Context
Stablecoins are cryptocurrencies whose rate is tied to the value of another asset, usually the U.S. dollar, Bloomberg explains. Their issuers keep reserves in cash, short-term government bonds and other liquid assets to keep the exchange rate stable.
In November, the bitcoin price posted its worst monthly performance since 2022, a period when the market was rocked by a series of bankruptcies. Meanwhile, USDT turnover, according to CoinGecko, rose by about $1 billion over the month to $184.4 billion.
This article was AI-translated and verified by a human editor
