Tether CEO strongly retaliates against S&P downgrade, stating "proud to be despised by TradFi"

The global authoritative rating agency S&P Global recently downgraded the stablecoin rating of Tether (USDT) from “Restricted (4)” to “Weak (5)”, which is the lowest level in the rating system.

S&P pointed out in the report that the main reason for the downgrade is the rising proportion of high-risk assets such as Bitcoin, gold, and corporate bonds in Tether's reserve assets, and there is a “persistent information disclosure gap.”

Tether CEO Paolo Ardoino responded by saying, “We take pride in being hated by you.” He directly pointed out that the traditional framework “fails to capture the nature, scale, and macroeconomic significance of digital native currencies.”

01 S&P Downgrade Decision: High-Risk Assets and Lack of Transparency

On Wednesday, S&P Global officially downgraded the rating of the Tether stablecoin to the lowest level “5 (Weak)” in its evaluation system.

This marks the public divergence between traditional financial rating agencies and giants in the crypto industry.

Since establishing a stablecoin rating system from level 1 to 5 in 2023, S&P has taken such a harsh assessment stance towards industry leaders for the first time.

The core basis for the downgrade decision is the change in Tether's reserve asset structure. S&P specifically emphasized in the report that over the past year, Tether has significantly increased the proportion of Bitcoin, gold, secured loans, corporate bonds, and other investments in its reserve assets.

These asset classes are classified by S&P as “high-risk assets” due to their multiple challenges of “credit risk, market risk, interest rate risk, and foreign exchange risk.”

More importantly, S&P noted that Tether's disclosure regarding these high-risk assets is extremely limited, making it difficult for investors to assess its actual risk exposure.

02 Tether Responds: Criticism of Traditional Financial Evaluation Models

Tether's response to the rating results can be described as intense. A company spokesperson stated in an email that S&P used a “traditional framework that fails to capture the nature, scale, and macroeconomic significance of digital-native currencies.”

and ignored the data that “clearly demonstrates the resilience, transparency, and global utility of USDT.”

Ardoino views the S&P's critical framework as a broader resistance from traditional finance against companies operating outside what he calls the “broken” system.

“When any company tries to challenge the gravity of the broken financial system, the propaganda machine of traditional finance begins to feel concerned,” Ardoino wrote.

He insists that Tether's positioning is unique, claiming that the company is “the first over-capitalized company in the financial industry,” and emphasizes that there are no “toxic” assets in its reserves.

Ardoino also defended David Sacks in a social media post, stating that the attacks on him were “unfounded.”

He pointed out that the group attacking Sacks is the same group targeting Elon Musk and Tether, further reinforcing his critical stance on the traditional financial system.

03 Reserve Asset Perspective: Strategic Logic and Risks of High-Risk Allocation

The tilt of Tether's reserve assets towards high-risk categories is not accidental, but rather a proactive choice in the current macroeconomic environment.

With the Federal Reserve maintaining high interest rate policies, the yields of safe assets such as traditional U.S. Treasury bonds have significantly increased, which should enhance the profitability of stablecoin issuers.

However, Tether goes against the trend by continuously increasing the allocation of cryptocurrencies like Bitcoin and alternative investments in its reserves.

This strategy may hide an urgent demand for improving yield — after the circulation of USDT exceeds 180 billion USD, even a small increase in the interest rate spread can bring considerable absolute returns.

From the analysis of asset allocation details, Tether's increased holdings in Bitcoin are particularly noteworthy. According to Tether's quarterly verification report, as of the first quarter of 2025, its Bitcoin holdings are valued at over 5 billion USD.

The scale has increased more than five times compared to less than 1 billion USD two years ago.

This configuration, although it has brought significant paper gains during the Bitcoin bull market over the past two years, has also introduced risks that are contrary to the traditional stablecoin design philosophy.

Arthur Hayes, co-founder of BitMEX, has also issued a warning indicating that if the value of Bitcoin and gold held by Tether were to drop by 30%, it could put the company at risk of bankruptcy.

04 Market Impact and Response: Changes in Capital Flow and Competitive Landscape

The S&P downgrade decision had an immediate impact on the USDT market, which has a total scale of 184 billion USD.

Although the price of USDT remains firmly pegged to 1 USD, on-chain data shows a significant change in the capital flow of the USDT/USDC trading pair on centralized exchanges within 24 hours after the announcement.

Approximately 350 million USD has shifted from USDT to USDC. This capital movement, while not triggering panic selling, indicates that institutional investors and cautious traders are beginning to reassess the relative risks of the two major stablecoins.

From a broader perspective of the stablecoin competitive landscape, S&P's downgrade may accelerate the market differentiation process.

USDT has long maintained its market dominance due to its first-mover advantage, wide exchange listings, and deep liquidity, but this advantage is now being challenged.

On one hand, jurisdictions with clear regulations such as the European Union, the United Kingdom, and Singapore are pushing stablecoin issuers to comply with stricter disclosure and reserve requirements.

On the other hand, institutional investors are increasingly relying on traditional risk assessment frameworks when allocating stablecoins, and S&P's ratings provide such a reference framework.

05 The Transparency Game: The Historical Controversies and Current Status of Tether

The game between Tether and transparency requirements has been ongoing for years, and this latest downgrade by S&P is just the newest chapter.

Looking back at history, Tether raised market concerns as early as 2017 due to issues with proof of reserve assets. At that time, it claimed that each USDT was fully backed by 1 USD, but it delayed providing audit proof.

In 2019, the New York Attorney General's Office launched an investigation into Tether and its affiliated company Bitfinex, ultimately settling for $18.5 million.

and requires it to regularly disclose the composition of reserves. This event became a turning point in Tether's transparency process, prompting it to start publishing quarterly attestation reports from 2021.

However, the latest assessment by S&P indicates that Tether's transparency improvements have still not met the expected standards of traditional financial markets.

S&P specifically pointed out that “Tether continues to provide limited information regarding the credit quality of its custodians, counterparties, or bank account providers.”

This criticism hits the mark—investors in traditional finance are not only concerned about the quality of the assets themselves but are also extremely focused on who holds these assets, in what jurisdiction, and under what regulatory protections.

06 Regulatory Trends Outlook: Global Stablecoin Standards Accelerating Formation

The downgrade decision by S&P regarding Tether comes against the backdrop of an accelerating global regulatory framework for stablecoins.

The European Union's regulation on crypto asset markets (MiCA) came into effect in June 2024, imposing strict reserve asset requirements, liquidity management, and disclosure standards on stablecoin issuers.

Although the United States has not yet passed comprehensive federal cryptocurrency regulations, the House Financial Services Committee is advancing the legislative work on the “Payment Stablecoin Act” and is expected to hold a vote by 2025.

These regulatory developments point to a clear trend: stablecoins will face a level of regulatory intensity similar to that of banking institutions.

From the perspective of specific regulatory requirements, the transparency of reserve assets will become a core focus. The MiCA regulation requires stablecoin issuers to regularly (at least monthly) publish reserve audit reports issued by auditing firms recognized by the EU.

Detailed disclosure of asset types, credit quality, maturity structure, and custodial arrangements.

For Tether, the path to regulatory compliance faces severe challenges. As a company registered in El Salvador, the market that Tether can directly serve is already limited.

After the implementation of the MiCA regulations, its operations in the United States and Europe will face significant legal obstacles.

Future Outlook

The stablecoin market landscape is undergoing a reshaping. Data shows that after the S&P downgrade of USDT, approximately $350 million flowed from USDT to its competitor USDC. Although this capital movement did not trigger widespread panic, it does indicate that the market is reassessing the relative risks of these two major stablecoins.

Gate.io, as a leading global cryptocurrency exchange, offers users a variety of stablecoin trading options. During periods of market volatility, diversified asset allocation is more important than ever.

Regardless of how the market evaluates Tether, investors can conveniently manage their stablecoin assets through Gate.io.