Compass Investments

– On November 26, S&P Global Ratings downgraded Tether (USDT) to “5 (weak), which is the lowest mark on the five-level risk scale for stablecoins set in 2023.

The agency justified it on the basis of “persistent deficiencies in the provision of information” and the growing share of “higher-risk assets” in Tether’s collateral, including bitcoin, gold, promissory notes, collateralized obligations and other investments.

S&P noted that these assets carry “credit, market, interest rate and currency risks, and also pointed to Tether’s limited awareness of the reliability of its custodians and partners.

However, the agency acknowledged that USDT has shown notable price stability even amid recent market turbulence.

Ardoyno responded hours later, saying, “We are proud to bear your dislike.

Classical valuation techniques designed for old financial structures. have failed, forcing regulators around the world to rethink such approaches.

Instead, Tether has built the industry’s first overcapitalized structure without toxic reserves.

Paolo Ardoyno, head of Tether Holdings Ltd.

Ardoyno suggested in his post that the credit scoring approaches S&P relies on have previously led to high ratings for traditional financial institutions that then went bankrupt.

He suggested that these antiquated systems were designed for banks and insurers with long histories of tangled balance sheets, rather than digital currency issuers with different collateral structures and market realities.

Ardoyno emphasized that Tether’s “overcapitalized” model compares favorably to structures that were valued using old agency models. He saw S&P’s reaction as evidence of the discomfort of traditional financial players with companies that are moving away from what he called a “broken financial system”.

In response to the downgrade, Tether issued a statement saying that it “completely disagrees with the report’s assessment.

The company cited its track record of overcoming bank collapses, market crashes, liquidity problems and wild swings while always maintaining stability and the ability to redeem USDT.

Tether says it has issued about $184 billion worth of USDT and continues to hold sufficient collateral – including U.S. Treasury bills and other assets – to cover all redemption requests.