Behind S&P's Downgrade of Tether: The Battle Over Stablecoin Reserves Emerges

[Crypto World] S&P recently downgraded Tether’s reserve rating to the “weak” category, sparking quite a bit of discussion in the industry. An analysis team from an international bank even released a report, pointing out that this exposes a major weakness of stablecoins—the ever-present risk of depegging, which is not as much of a concern for other tokenized assets.

What’s the core issue? It’s the same old problem: reserve structure. Stablecoin issuers must ensure they can always handle a potential run, which means their reserves need to be highly liquid and low risk. However, on Tether’s side, the proportion of high-risk assets in their reserves is increasing, and it’s no longer made up solely of cash and short-term US Treasuries. This directly impacts whether users can redeem smoothly when they want to cash out.

From a regulatory perspective, regulators around the world are now emphasizing the importance of transparency and high-quality liquid assets. With this trend, stablecoins like USDC, which have higher ratings and stronger compliance, may be more favored by institutional investors. This could subtly change the market landscape.