- Tether CEO Paolo Ardoino fired back at S&P’s latest downgrade of his company.
- The ratings firm gave the stablecoin company a “weak” rating of 5 due to its reserve’s exposure to high-risk assets, which could risk the USDT’s 1:1 peg to the US dollar.
S&P recently downgraded Tether’s ratings. However, the giant stablecoin issuer’s CEO, Paolo Ardoino, wasn’t taking things without firing his own shots. He unleashed his own criticisms on the credit ratings institution.
Why S&P Downgraded Tether
S&P knocked one point down Tether’s standing from a 4 “constrained” rating to a 5 “weak” score. The market insight and stock index provider cited the stablecoin company’s increased investment in risky assets to back its stablecoin reserves, particularly USDT, and limited disclosures as reasons for the downgrade.
USDT, a stable digital asset with a market cap of over $184 billion, is backed 5.6% in Bitcoin (BTC). The figures are over the 3.9% overcollateralization margin.
S&P warned that the allocation exposes USDT to undercollateralization if the value of Bitcoin and other high-risk assets held by the company were to decline. Additionally, the rater also found that gold, secured loans, and corporate bonds accounted for 24% of the stablecoin issuer’s overall reserves. The numbers were a significant jump from 17% in September 2024.
All these could risk Tether’s stablecoins, particularly USDT, losing their peg if the high-risk reserve’s values suddenly underwent deep corrections. Bitcoin’s recent crash from an all-time high of $126,198.07 in early October to barely hanging on at around $80,000 last week heightened S&P’s concerns. Moreover, the other assets in its portfolio subject the digital asset institution to credit, market, interest rate, and foreign exchange risks.
Meanwhile, Tether has grown its gold reserves to 116 tonnes. The move makes it the largest non-central bank gold holder in the world. Ardoino claimed that a high-security vault in Switzerland stores the company’s gold holdings.
Tether CEO’s Response
In a statement on X, Ardoino said that his company will wear S&P’s loathing with pride. He pointed out that the firm’s “classical rating models” were only built for legacy financial institutions.
The CEO of Tether claimed that S&P’s high ratings never saved many companies from eventual collapse. Hence, these often caused many regulators to question the ratings agency’s independence and objective assessment.
Ardoino aligned the S&P’s downgrade with traditional finance (TradFi) propaganda. He argued that the old guards in finance are usually worried when any company tries to fix the broken financial system. S&P ratings serve as a warning to entities that dare to decouple from the conventional landscape.
Furthermore, Ardoino explained that Tether “built the first overcapitalized company in the financial industry, with no toxic reserves.” He highlighted that the gamble paid off as the company remains “extremely profitable.”
“Tether is living proof that the traditional financial system is so broken that it’s becoming feared by the emperors with no clothes,” Ardoino concluded.
Amid Tether’s allegations, S&P has notably given its rival, Circle, a rating of 2. This falls under the “strong” label, indicating the satisfactory capacity of USDC’s issuer to meet its financial obligations and a significantly lower level of risk exposure.
What’s your Reaction?
+1
1
+1
0
+1
0
+1
0
+1
0
+1
0
+1
0
