Concerns About USDT Reliability Emerge Among S&P 500 Index Curators

S&P Global Ratings analysts evaluated the risks associated with various stablecoins and examined their stability. USDT, the largest stablecoin by market capitalization, received a relatively low rating from analysts due to Tether’s asset transparency issues.

S&P Global Ratings, a global rating agency recognized primarily for creating and managing the S&P 500 U.S. stock index, conducted an analysis on the stability of stablecoins, evaluating the risks of depegging for eight different coins from their underlying assets.

The study led to analysts assigning ratings to each asset on a scale from 1 to 5, with 1 being the highest score and 5 the lowest. The evaluation process involved examining:

• the quality of assets;
• factors for risk mitigation;
• aspects of asset management;
• the legal and regulatory environment;
• redeemability;
• liquidity;
• the technology that supports the asset;
• dependencies on third parties;
• historical performance.

No stablecoins reviewed received a score of 1 from the analysts.

Tether (USDT), the leading stablecoin by market cap, was rated “constrained” (4) by S&P analysts. This low rating is primarily attributed to the issuer’s lack of asset transparency.

First Digital USD (FDUSD) was also rated “constrained” due to insufficient information regarding the creditworthiness of the financial institutions that issue the asset. Dai (DAI) received a “constrained” rating as well, owing to the significant risk associated with the limited liquidity of the assets in its vault.

The lowest-rated coins were TrueUSD and Frax, both receiving a “weak” (5) rating from analysts. TUSD’s low score was due to the absence of publicly accessible information, while FRAX was rated poorly because of its dependence on an algorithm.

Gemini Dollar (GUSD), Pax Dollar (USDP), and USD Coin (USDC) received higher ratings. S&P analysts classified them as “strong” (2), mainly due to the quality of the assets backing their value. Notably, GUSD and USDP are regulated by the NYC Department of Finance.

Lapo Guadagnuolo, Senior Analyst at S&P Global Ratings, noted that stablecoins are increasingly integrated into the financial market structure, serving as a link between digital assets and fiat currencies. However, the stability of these coins is directly influenced by the liquidity management and asset quality of their issuers. The rating agency plans to continue monitoring the stablecoin market and will regularly publish its Stablecoin Stability Assessment, he stated.

Chuck Mounts, Chief DeFi Officer at S&P Global Ratings, highlighted the agency’s dedication to staying at the forefront of trends in the digital asset market. He mentioned that S&P clients will have the ability to make informed investment choices based on the insights provided by analysts.

Previously, Moody’s introduced an AI service designed to predict the potential deprivation of stablecoins within a 24-hour timeframe.

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