Tether reacts to S&P’s stability rating cut; UK sandbox invite

Getting your Trinity Audio player ready...

Tether is seething after a top ratings agency questioned its financial stability. The U.K. is looking for a stablecoin to play in its regulatory sandbox, and Canada’s first authorized stablecoin is going live (sort of).

• Tether not loving S&P’s public shaming
• Tether confirms Uruguay exit
• Tether expanding elsewhere
• UK invites stablecoins to play in its sandbox
• Bolivia welcomes stablecoins into financial system
• QCAD celebrates Canadian stablecoin milestone

On November 26, the S&P Global ratings agency issued a damning review of the ability of USDT, the market-leading stablecoin issued by Tether, to maintain its 1:1 peg with the U.S. dollar. The agency’s concerns led it to assign USDT a ‘5’ rating—the lowest possible—indicating ‘weak’ stability, one grade below the agency’s previous rating of USDT.

There’s currently $184.4 billion worth of circulating USDT, $10 billion higher than at the end of Q3, according to Tether’s most recent ‘attestation’ (not an audit) of its fiat reserves. USDT’s closest rival, the USDC stablecoin issued by Circle (NASDAQ: CRCL), boasts a market cap of $76 billion.

But the Q3 report showed the ‘cash & equivalents’ share of Tether’s reserves is on the decline, falling nearly three points from Q2 to 77.2%. Meanwhile, the amount of Tether’s controversial ‘secured loans’ shot up 44.5% to an all-time high of $14.6 billion, while its stack of the volatile BTC token rose 10% to $9.85 billion.

S&P noted that Tether’s BTC “now represents about 5.6% of USDT in circulation, exceeding the 3.9% overcollateralization margin, indicating the reserve can no longer fully absorb a decline in its value. A drop in the bitcoin’s value combined with a decline in value of other high-risk assets could therefore reduce coverage by reserves and lead to USDT being undercollateralized.”

The said drop in value isn’t a theoretical concern. The BTC token’s value plunged by one-third in the past six weeks, crashing from its all-time high of $126,080 on October 6 to $82,000 last week before rebounding somewhat to its ~$86,000 price as of late Sunday, November 30.

Meanwhile, transparency on the individuals/entities on the other side of Tether’s loans “remains limited … which could inflate risks if their creditworthiness is weak.” Transparency is similarly limited on Tether’s “reserve management and risk appetite, lack of a robust regulatory framework, no asset segregation to protect against the issuer’s insolvency, and limitations to USDT’s primary redeemability.”

Tether’s quarterly attestations—produced by BDO Italia, which every three months is granted only a single day’s snapshot of Tether’s books, and for which BDO makes no claims regarding the story those books told the day before or after the attestation—”still do not disclose information on the custodians, counterparties, or bank account providers” of its U.S. Treasury bills and overnight reverse repurchase agreements.

The review wasn’t all bad, as S&P said USDT “has maintained a notable level of price stability, especially in recent years and over the past 12 months.” But the agency also noted that Tether’s market cap relative to USDC had fallen from 3.5x to 2.4x over the past 12 months.

S&P has yet to release this year’s assessment of USDC, but its 2024 review assigned Circle’s stablecoin a ‘2’ rating, indicating ‘strong’ stability, while its asset assessment gave USDC a ‘1’ (very strong) rating.

Tether’s reaction to the S&P review was swift, with CEO Paolo Ardoino tweeting that “we wear your loathing with pride.” Ardoino claimed “the traditional finance propaganda machine is growing worried when any company tries to defy the force of gravity of the broken financial system.”

Ardoino later tweeted that the “system is broken” and S&P is “upset we make it evident.” Days after the fact, Ardoino continues to tweet vitriol (and Metallica lyrics) at the agency, suggesting the report hit a nerve.

Tether staffer Bo Hines, who until August served as executive director of the White House’s Presidential Council of Advisers for Digital Assets, tweeted that the S&P rating represented “institutional envy undergirded by a failed system.”

Uruguay exit

Last week definitely wasn’t Tether’s best ever, as Uruguayan media reported that the company had informed the government that it was shutting down its local operations and dismissing most of its local staff.

The news followed reports in September that Tether’s Uruguayan block reward mining offshoot Microfin had stopped paying its electrical bill in May. UTE, the state-owned power utility, cut off Microfin’s juice in July when the unpaid bill neared $5 million.

At the time, Tether representatives claimed that reports of the company exiting Uruguay due to the high cost of local energy “do not accurately reflect the situation.” Tether claimed it was having “ongoing discussions with the government to resolve the outstanding friction.”

In 2023, Tether outlined plans to invest $500 million in Uruguay to construct three mining/AI data center facilities. However, the company had spent only about one-fifth of that sum before this week’s confirmation of its exit. Tether reportedly attempted to negotiate with the government to secure better rates, but the parties couldn’t come to a mutually satisfactory arrangement.

Around the time that Microfin stopped paying its bills, Ardoino was claiming that Tether had invested $2 billion in building out its mining operations, going so far as to declare that Tether would be “the biggest Bitcoin miner in the world” by the time 2025 drew to a close.

Tether recently struck a flurry of deals with related parties, including Northern Data (ETR: NB2.MU), the controversial miner-turned-AI operator in which Tether controls a majority stake. Earlier this month, Northern Data completed the sale of its Peak Mining unit to Elektron Energy LP, a company ‘affiliated’ with Tether.

Back to the top ↑

Tether keeps wheeling, dealing

Coinbase (NASDAQ: COIN) reported last week that Brazilian blockchain payments firm Truther would launch the card on January 29, 2026, through a partnership with Visa (NASDAQ: V). Users will be charged 2% for currency conversions, but travelers will be spared the need to acquire local currency in advance, allowing them to spend only what they need at the moment.

Tether also boosted its stake in right-wing video-sharing platform Rumble (NASDAQ: RUM) last month, buying 1.06 million additional shares in three transactions over three days, taking its holdings to over 104 million shares. Tether already held a 48% stake in Rumble as part of Tether’s plan to make USDT the lingua franca of all Rumble-related commerce.

Last week, Everdawn Labs announced that USDT0, the omnichain version of USDT that Everdawn ‘manages,’ has surpassed 415,000 transfers and $50 billion in ‘total value moved’ since the token’s launch in January.

The ever-mysterious Everdawn, which some suspect is a ‘front’ for Tether, claimed that one-quarter of that $50 billion volume was transferred in just the past 30 days, reflecting the growing number of networks (now 15) on which USDT0 is available (and/or users’ desire to ‘clean’ tainted USDT based on Ethereum).

Back to the top ↑

FCA sandbox stablecoin invitation

U.K. regulatory authorities have been roundly criticized by the digital asset sector for lagging behind their American counterparts, failing to match the Yanks’ breakneck pace in dismantling regulatory barriers, particularly when it comes to stablecoins.

However, the Bank of England (BoE) has recently launched a stablecoin consultation on how to reconcile the need to foster innovation with the need to protect consumers and safeguard the broader financial sector. Now, the Financial Conduct Authority (FCA) is looking to move this discussion from the whiteboard to a more concrete environment. Or at least, a sandy one.

On November 26, the FCA’s exec director of payments/digital finance, David Geale, gave a speech on the regulator’s approach to regulating digital assets and stablecoins, in which he announced the launch of “a stablecoin-specific cohort in our Regulatory Sandbox.”

Geale says applications to participate in this test are now open and will be accepted through January 18. Geale claims the FCA has already accepted “our first successful entry,” but he played coy as to their identity, saying only that “a major firm” was “gearing up for testing in the next couple months.” Geale said the FCA would support this unidentified issuer “as they test their GBP stablecoin for payments in another world first.”

The FCA also announced it would be “hosting in-person stablecoin policy sprints in March.” These sprints will bring together “participants from traditional finance and payment and fintech firms” to explore “retail and wholesale use cases for stablecoins, and help determine where regulation is or is not needed.” Geale said “expressions of interest” for these sprints will open in January.

Back to the top ↑

Bolivia plots stablecoin integration

Bolivia has announced plans to integrate stablecoins into its financial system as part of the government’s efforts to shore up its wonky economy. Until last year, Bolivia had banned all forms of digital assets, but Minister of Economy Jose Gabriel Espinoza recently told Reuters that it was impossible to “control crypto globally, so you have to recognize it and use it to your advantage.”

Espinoza said the plan is to allow banks to incorporate stablecoins into saving accounts, credit cards, and loans, allowing the tokens to “begin to function as a legal tender payment instrument.” Stablecoins like USDT have proven popular with Bolivians to counter depreciation of their local currency but the government plans to eventually expand its digital asset détente to include other tokens.

Bolivia’s Banco Bisa began offering USDT custody services last November following a green light from the Financial System Supervision Authority. Merchants large and small, including many international car dealerships, have begun pricing products in USDT alongside the far less stable local currency price.

Back to the top ↑

QCAD gets Canadian securities nod

Finally, a shoutout to QCAD, the first Canadian dollar-denominated stablecoin to be deemed compliant under Canada’s existing regulatory standards. On November 20, the Canadian Securities Administrators (CSA) granted exemptive relief to the QCAD Digital Trust to issue QCAD as a value-referenced crypto asset (VRCA, aka stablecoin).

QCAD ‘servicer’ Stablecorp Digital Currencies Inc—which is backed by both Circle and the Coinbase digital asset exchange—subsequently announced that the QCAD Digital Trust had “received a final receipt for the prospectus qualifying the distribution of QCAD tokens pursuant to Canada’s current regulatory framework for stablecoins.”

QCAD technically launched five years ago, and its market cap is only CAD1.33 million (US$952,000). However, Stablecorp states that the token will now be “rolling out to the broader public through Stablecorp’s extensive network of exchanges and partners.” Stablecorp CEO Kesem Frank added that the CSA approval marked “the beginning of a profound shift” for both QCAD and Canada’s digital asset market.

Circle CEO Jeremy Allaire celebrated the news, tweeting that it was “great to see more clearly regulated stablecoins coming online,” adding that Circle’s new Layer-1 stablecoin network Arc was pleased to welcome QCAD’s launch as “a Day 1 currency.”

Canada’s latest federal budget contained language indicating the government’s plans to craft legislation allowing for the issuance of fiat-backed stablecoins. The Alberta-based Tetra Digital Group has already announced plans to issue its own Canadian dollar-denominated stablecoin early in the new year, with financial support coming from a mix of tradfi/fintech sources, including Coinbase’s venture capital unit.

Back to the top ↑

Watch | Spotlight On: Centi Franc—the truly stable stablecoin