Tether CEO Disputes S&P USDT Downgrade Over High-Risk Assets and Reserves

• S&P Global downgraded USDT’s peg-stability rating to “weak” on November 26, 2024, citing high-risk assets like Bitcoin and gold.

• Tether generates about $500 million monthly from U.S. Treasury yields, bolstering its revenue amid expanding reserves.

• Experts like Joseph Ayoub from Citi note Tether’s reserves exceed debt, with billions in interest income from a lean operation of 150 staff, outperforming many traditional banks in collateralization.

Discover why Tether CEO slams S&P’s USDT downgrade as flawed. Explore robust reserves, expert insights, and stablecoin stability amid market concerns—stay informed on crypto finance today.

What is the Reason Behind S&P’s Downgrade of Tether’s USDT Stablecoin Rating?

S&P Global downgraded Tether’s USDT peg-stability rating from “constrained” to “weak” on November 26, 2024, marking the second such action since March 2023. The agency pointed to increasing allocations in high-risk assets, including cryptocurrencies like Bitcoin, precious metals, corporate bonds, and secured loans, which introduce credit, market, interest-rate, and foreign-exchange risks. This assessment surprised industry observers, given USDT’s history of maintaining its $1 peg through volatile market conditions.

How Does Tether Respond to the USDT Downgrade Criticism?

Tether CEO Paolo Ardoino vehemently disputed S&P’s evaluation, labeling it as reliant on “outdated legacy models” and incomplete information that fails to capture the company’s true financial health. He emphasized that at the end of Q3 2024, Tether held approximately $7 billion in excess equity on top of $184.5 billion in stablecoin reserves, plus $23 billion in retained earnings within the broader Tether Group. Ardoino argued these figures demonstrate USDT is backed by far more assets than detractors suggest, with an additional $7 billion buffer in reserves featuring varied risk profiles.

Ardoino further spotlighted Tether’s potent revenue stream, generating roughly $500 million monthly from U.S. Treasury yields due to substantial holdings in short-term government securities. As Tether expands, this income has surged, yet S&P overlooked the Tether Group’s structure, which includes diverse revenue-generating divisions and equity unrelated to stablecoin operations. For exchanges and users relying on USDT for daily transactions, Ardoino’s defense aims to quell any unfounded alarms about the stablecoin’s reliability.

The downgrade has stirred debates on USDT’s asset allocation, reigniting scrutiny over reserves composition. Analysts note that while Tether’s model supports billions in daily trading, perceptions of vulnerability could impact market confidence. However, Ardoino’s rebuttal underscores the stablecoin’s resilience, backed by comprehensive financials that exceed public summaries.

Frequently Asked Questions

What Assets Back Tether’s USDT and Why the High-Risk Concerns?

Tether’s USDT is primarily backed by U.S. Treasuries, cash equivalents, and other reserves totaling $184.5 billion as of Q3 2024, with excess equity adding layers of protection. S&P flagged high-risk elements like Bitcoin, gold, corporate bonds, and loans due to potential volatility in credit, market, and exchange rates, potentially affecting peg stability during downturns.

Is Tether’s USDT Stablecoin at Risk of Losing Its Peg After the Downgrade?

No, Tether maintains a strong track record of peg stability through market turbulence, supported by $7 billion in excess equity and $23 billion in retained earnings. CEO Paolo Ardoino affirms the reserves far outpace liabilities, generating substantial income to buffer risks, making de-pegging unlikely based on current financials.

Key Takeaways

• Robust Financial Backing: Tether’s $184.5 billion reserves, $7 billion excess equity, and $500 million monthly Treasury income highlight a stronger position than S&P’s assessment suggests.
• Expert Validation: Former Citi analyst Joseph Ayoub praises Tether’s collateralization as superior to many banks, with billions in profits from a small team.
• Market Implications: While the downgrade raises flags on risk assets, Tether’s defense encourages users to focus on verified strengths and monitor ongoing developments.

Conclusion

The S&P downgrade of Tether’s USDT peg-stability rating has sparked debate, but CEO Paolo Ardoino’s critique reveals deeper financial resilience through ample reserves and revenue streams. With expert endorsements affirming superior backing, USDT remains a cornerstone for crypto trading. As the industry evolves, stakeholders should track Tether’s transparency reports for sustained confidence in stablecoin stability.