Key Takeaways
- S&P Global Ratings assesses Tether’s ability to maintain its peg as “constrained.”
- Concerns include reserve transparency, regulatory framework, and risk appetite.
- USD Coin (USDC) received a “Strong” assessment.
Assessment of Tether by S&P Global Ratings
Tether (USDT), the largest stablecoin by market capitalization, faces challenges in maintaining its peg to the U.S. dollar, according to S&P Global Ratings. The rating agency’s asset assessment score for Tether is 4 out of 5, indicating constraints.
Concerns Raised by S&P Global Ratings
The report highlights the lack of transparency regarding entities managing Tether’s reserves, including custodians and counterparties. This opacity extends to information about the assets held by Tether, such as short-term U.S. treasuries and riskier investments like corporate bonds and precious metals.
Moreover, the report notes the absence of a regulatory framework, limitations on redeemability, and asset segregation deficiencies within Tether’s operations.
Previous Regulatory Scrutiny
In 2021, Tether faced enforcement actions from regulatory bodies due to inadequate disclosure of reserve information. The Commodity Futures Trading Commission (CFTC) and New York Attorney General were involved in addressing these concerns.
Assessment of Other Stablecoins
S&P Global Ratings evaluated a total of eight stablecoins, with USD Coin (USDC), Pax Dollar (USDP), and Gemini Dollar (GUSD) receiving favorable scores. On the other hand, FRAX (FRAX) and TrueUSD were rated as “Weak,” along with Tether, DAI (DAI), and First Digital USD (FDUSD).
