S&P Global Ratings has issued a significant downgrade to Tether (USDT), the world’s most used stablecoin, marking a rare and unprecedented event in the stablecoin market. This decision raises concerns about the stability of USDT and its ability to maintain its peg to the US dollar amidst regulatory scrutiny and market volatility. The report criticizes Tether’s reserve structure for being exposed to volatile assets like Bitcoin and gold, questioning its long-term resilience. 5.6% of reserves are currently invested in Bitcoin, exceeding the estimated margin of 3.9%, while concerns around a lack of independent audits and a permissive regulatory framework in El Salvador continue to cast doubt on Tether’s model robustness. Despite these concerns, Tether emphasizes its strong financial backing with significant holdings in US Treasury bills, gold, and other low-risk assets. The report’s findings highlight a critical point: the need for greater transparency, robust reserves, and credible regulation within the stablecoin industry.