S&P Downgrade Ignites Digital Feud as Tether Embraces Criticism

Tether Downgraded by S&P as Crypto Community Dismisses Concerns

S&P Global downgraded Tether’s USDT stablecoin last Wednesday, marking it the lowest rating on the agency’s stablecoin stability scale. The move has reignited longstanding debates over Tether’s reserve transparency and potential undercapitalization.

The crypto world, unfazed by recurring skepticism, has a dismissive two-word response: “Tether FUD.” Despite market turbulence—including the collapses of Sam Bankman-Fried, Alex Mashinsky, and others—USDT has maintained its U.S. dollar peg and redeemability. Meanwhile, Tether has raked in more than $10 billion in profits in the first nine months of 2025, putting it on par with Wall Street heavyweights like Goldman Sachs and Morgan Stanley.

Yet the current bear market has drawn renewed scrutiny from traditional finance observers. On the quiet trading day before Thanksgiving in the U.S., S&P lowered USDT’s rating from 4 to 5. The downgrade cited familiar concerns about Tether’s opaque reporting and flagged a new issue: bitcoin now accounts for over 5% of USDT’s reserves, meaning prolonged BTC price drops could risk undercollateralization.

Tether CEO Paolo Ardoino fired back, stating, “We wear your loathing with pride.” He criticized conventional financial institutions, claiming Tether has built “the first overcapitalized company in the financial industry, with no toxic reserves,” and added, “We are living proof that the traditional financial system is so broken that it is feared by the emperors with no clothes.”

The debate spilled onto social media over the weekend, as angel investor Jason Calacanis suggested Tether should sell all its bitcoin, hold only U.S. Treasuries, and complete not one but two independent audits by American firms. Crypto enthusiasts quickly pushed back, questioning the logic of replacing a relatively small portion of BTC with government debt and recalling Calacanis’ earlier calls for a bailout during the Silicon Valley Bank collapse in March 2023.

Independent audits remain a key point of contention. Financial blogger Quoth the Raven, a former gold advocate now pro-bitcoin, commented, “When a company refuses a full, independent audit, it’s never because everything is pristine. Markets have a long, bloody track record of chewing up the naïve. An audit is the bare minimum for any entity issuing tens of billions in synthetic dollars that underpin entire markets.”

Tether’s USDT continues to operate as intended, but the downgrade serves as a reminder that the stablecoin, and the wider crypto ecosystem, remain under scrutiny from both traditional finance and the crypto community itself.