When Rating Agencies Come Knocking
Tether (USDT) CEO Paolo Ardoino went on the offensive Wednesday after S&P Global Ratings knocked down the stablecoin issuer's stability rating. And he didn't pull punches.
In a post on X, Ardoino said his company wears the "loathing" from S&P with pride. He took aim at what he called "classical rating models," arguing they've historically led investors into companies that eventually collapsed despite sporting investment-grade ratings.
"The traditional finance propaganda machine is growing worried when any company tries to defy the force of gravity of the broken financial system," Ardoino declared.
The Overcollateralization Defense
Ardoino didn't stop at criticism. He claimed Tether is the "first overcapitalized company" in the financial industry and remains "extremely profitable." It's a bold statement in an industry where transparency has been an ongoing concern.
S&P Global Ratings didn't immediately respond to requests for comment on Ardoino's remarks.
What Triggered the Downgrade
Here's what has S&P concerned: The rating agency downgraded Tether's ability to maintain its dollar peg from "Constrained" to "Weak," the lowest possible tier. The culprit? A higher allocation to what S&P considers "high-risk" reserve assets, including Bitcoin (BTC) and gold.
The numbers are significant. Bitcoin now represents 5.6% of USDT's circulating supply, and S&P warned that a drop in these high-risk assets could leave reserves insufficient for collateral coverage. That's the kind of risk that keeps rating agencies up at night.
The Bigger Picture
Tether relocated its operations to El Salvador earlier this year, embracing the country's cryptocurrency-friendly regulatory environment. Ardoino has made clear the company has no interest in a Wall Street listing, pointing to Tether's profitability and what he describes as conservative management.
The company's latest attestation report shows $181 billion in reserves backing its tokens. Tether is also the 17th largest holder of U.S. sovereign debt, with $135 billion in treasuries. Those are the kind of credentials Ardoino wants investors to focus on, not S&P's methodology.
The clash highlights a fundamental tension: Can traditional rating agencies accurately assess crypto companies, or are they applying outdated frameworks to a new financial paradigm? Ardoino clearly believes it's the latter.