Tether’s user base exceeded 534 million, while the stablecoin’s market capitalization remained close to $187.3 billion, however, its stability rating was lowered by S&P Global Rating.
S&P Global Ratings downgraded USDT’s stability rating to “Weak” due to increased risks to institutional reserves held in Tether and persistent gaps in the company’s data disclosures. According to S&P, Bitcoin represents approximately 5.6% of USDT in circulation, a proportion that exceeds a 3.9% overcollateralization margin and could leave reserves exposed if the value of crypto assets declines.
Based on data from the last quarter of 2025, Tether reserves totaled around $192.9 billion, generating $15 billion in profit for the company throughout the year. S&P also noted limited disclosures regarding custodians, counterparties, and banking partners, and the absence of a formal asset segregation that would protect users if the issuer were to become insolvent.
In response to the downgrade, Tether CEO Paolo Ardoino said the agency’s methodology was “outdated and ill-suited to assess a digital asset entity,” rejecting the implication that USDT’s parity or trading was inherently compromised.
Parity stability, regulatory pressure, and market alternatives
While USDT has largely traded near $1.00, Moody’s Investors Service warned that gaps in regulatory oversight across the stablecoin sector increase the risk that governance or reserve failures could trigger rapid redemptions and broader financial contagion. Furthermore, the industry remains concerned about a massive capital flight from traditional banks into retail stablecoin reserves, which would complicate the economy as we know it.
The European Union’s Markets in Crypto-Assets (MiCA) framework prompted Tether’s exit from the EU retail market, a move that market participants cited as evidence of rising compliance costs for large issuers.
Despite the criticism, Tether’s scale and recent profitability support its market position. That status, however, coexists with structural questions about reserve quality, disclosure, and redemption capacity that credit rating agencies and regulators continue to investigate.
Policymakers and credit analysts are expected to push for clearer reserve governance and disclosures; whether those demands will close perceived gaps or trigger further market migration to more transparent alternatives will determine the dynamics of liquidity and settlement through 2026 and beyond.
