S&P Global Ratings Launches Stablecoin Assessment, Slams Tether’s USDT with Negative Review

S&P Global Ratings senior analyst Lapo Guadagnuolo believes that the growth of stablecoins does not mean that they are immune to risk factors.

The S&P Global Ratings introduced a stability assessment for stablecoins on Tuesday. According to S&P Global, the idea is to determine how truly “stable” the coins are in maintaining their pegs to whatever fiat they are tied to.

In total, the producer of the S&P 500 assessed eight stablecoins. They include Dai (DAI), Gemini (GUSD), First Digital USD (FDUSD), Tether (USDT), Frax (FRAX), Pax (USDP), USD Coin (USDC), and TrueUSD (TUSD).

In its assessment, S&P Global first considered what it said is the “quality of the assets backing the stablecoin”. It then went on to base the overall quality assessment on factors such as custody risks, credit, and market value.

Of the eight stablecoins that were reviewed, S&P, formerly called Standard & Poor’s, found only three to be reliably stable. USDC, USDP, and GUSD received the highest rating of 2, meaning “strong”. The reason for their strong rating, according to S&P, is because of the quality of their asset backing.

Surprisingly, Tether’s USDT, which is by far the leading stablecoin by market cap, received a rating of 4 (constrained). The assessment was largely based on the fact that there is not enough transparency about its assets. DAI and FDUSD also received similar ratings, putting the three stablecoins near the lower end of the spectrum.

TrueUSD and FRAX received the lowest ratings. They each got a 5 (weak) rating. TrueUSD was rated low for its lack of information. FRAX’s continued dependence on an algorithm also continues to cast a shadow of doubt over it.

It might be worth noting that the first assessment has ended without any of the stablecoins receiving a “very strong” evaluation.

S&P Global Ratings

S&P has once attempted to take a detailed look at stablecoins, but not at the depth of the current ratings. The deeper look, however, has been necessitated by the exponential growth that stablecoins have seen in recent years.

According to S&P Global Ratings senior analyst Lapo Guadagnuolo, the growth of stablecoins does not mean that they are immune to risk factors. He said partly:

“It’s important to acknowledge that stablecoins are not immune to factors such as asset quality, governance, and liquidity.”

Similarly, S&P Global Ratings senior director Mohamed Damak also confirmed that the feedback on the stablecoin market is generally about its transparency and how there is hardly any insight about the different stablecoins available therein.

To this end, S&P has taken it upon itself to assess for the sake of what it foresees as “a rising universe of coins and use cases”.

Although only eight stablecoins were assessed in the just-concluded exercise, S&P may soon expand its assessment to others.

Outside of stablecoins, S&P is also keeping an eye on the digital assets sector. It remains interested in revealing “operational and legal risk, blockchain oracle risk, crypto regulation, and digital bonds.”


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