A downgrade that exploded across social media

Last Wednesday, S and P Global delivered a sharp downgrade to USDT, marking it with the lowest rating in the agency’s framework for stablecoins. The move questioned the quality and transparency of USDT’s reserves, and it quickly spread through the crypto community.

Tether did not sit quietly. Within hours, the company responded with a bold message aimed directly at critics. According to Tether, the downgrade was not rooted in a fair view of its reserves but in a long history of skepticism toward the company.

Tether’s leadership often embraces controversy. This time was no different. Their public statement said they would wear the market’s dislike as a badge of honor, turning the downgrade into a rallying point for supporters.

Why S and P downgraded USDT

S and P said its concerns stemmed from the composition and transparency of Tether’s reserves. The agency highlighted several key issues.

Quality of underlying assets

S and P noted that part of USDT’s backing still contains riskier instruments compared to competitors that rely more heavily on short term government securities.

Disclosure standards

The agency said that Tether’s reporting remains less detailed than the frameworks used by regulated financial institutions.

Jurisdictional oversight

Tether is not supervised by a major financial regulator, which S and P said limits the strength of its safeguards.

The rating agency concluded that these factors justified the lowest possible score.

Tether’s reaction: sharp and direct

Tether responded by saying the downgrade was based on outdated narratives rather than present facts. They emphasized that USDT is fully backed, undergoes regular attestations and has never failed to meet redemptions.

The company also argued that rating agencies are applying traditional financial expectations to an asset that functions very differently. Their tone suggested frustration but also confidence in their market position.

Tether’s message resonated with parts of the crypto community that view traditional institutions as slow to understand digital markets. Others, however, saw the downgrade as a reminder that transparency remains an ongoing challenge for USDT.

How the market reacted

Despite the noise online, USDT held its peg through the news cycle. Trading volumes remained strong and redemptions showed no signs of stress. For many traders, USDT’s long track record matters more than a rating agency’s opinion.

Still, the downgrade sparked debate. Some investors began comparing USDT to newer rivals with stronger regulatory oversight. Others argued that S and P underestimated Tether’s ability to navigate market shocks.

The discussion highlighted a long standing divide. Some see USDT as a reliable pillar of the crypto economy. Others see it as an unresolved risk.

What this means for stablecoins today

The stablecoin sector is becoming more competitive and more scrutinized. Ratings, audits and regulatory frameworks are starting to matter for large institutions entering the market.

S and P’s downgrade may not weaken USDT’s dominance in the short term, but it increases pressure on Tether to improve transparency and reserve structure. It also gives regulated stablecoins more room to position themselves as safer alternatives.

Whether the downgrade changes the long term landscape remains to be seen. For now, it has added fuel to one of crypto’s oldest and loudest debates.