Bitcoin News Update: S&P's Lower Rating of Tether Sparks Tensions Between Crypto and Traditional Finance

Stablecoin Turbulence and Bitcoin Innovation Reshape Crypto Landscape

In late November 2025, the cryptocurrency sector experienced a period of relative calm, even as significant developments unfolded around stablecoins. The silence from major industry players coincided with a crucial moment for digital asset stability.

S&P Global Ratings recently downgraded Tether’s USDT stability assessment to “weak,” igniting intense discussion among Chinese traders. Despite China’s 2021 ban on crypto trading, many in the region continue to depend on USDT for underground transactions. S&P pointed to Tether’s 5.6% exposure to Bitcoin—well above its declared 3.9% buffer—and a lack of transparency regarding its reserves as key risks to maintaining USDT’s dollar peg.

It is estimated that over 20 million individuals in China access Bitcoin through unofficial channels, with USDT serving as their primary bridge to the crypto world. This downgrade marks a significant turning point for the region’s informal digital economy.

Tether’s Response and Industry Innovations

Tether’s CEO, Paolo Ardoino, dismissed the downgrade, attributing it to skepticism from traditional financial institutions. He emphasized the company’s robust $181.2 billion in reserves, which include $113 billion in US Treasuries, $9.9 billion in Bitcoin, and $12.9 billion in gold. Ardoino argued that Tether’s profitability and lack of risky assets demonstrate its strength, framing the criticism as resistance from established finance to decentralized alternatives.

Meanwhile, BitMask introduced the RGB20 protocol, expanding Bitcoin’s capabilities by enabling atomic swaps and decentralized trading of both fungible and non-fungible tokens. Tether’s plan to issue stablecoins on the RGB network could potentially inject $174.4 billion in liquidity into the Bitcoin ecosystem, drawing increased interest from institutional investors and developers.

Market Reactions and Ongoing Challenges

The immediate effects of the downgrade were mixed. While Chinese traders debated the validity of previous warnings about USDT’s stability, BlackRock’s spot Bitcoin ETF investors saw profits rebound to $3.2 billion as Bitcoin’s price climbed past $90,000. Renewed ETF inflows, following a period of withdrawals, reflected growing investor optimism, especially as expectations for Federal Reserve rate cuts increased.

However, Tether faced additional operational hurdles, including the closure of its mining operations in Uruguay after failing to secure favorable energy agreements. This highlighted vulnerabilities within the company’s infrastructure beyond just ratings concerns.

Looking Ahead: Regulation, Innovation, and Institutional Growth

As the market finds its footing, the balance between regulatory oversight, technological progress, and institutional participation will shape the future of digital assets. S&P’s reservations about Tether’s reserve transparency and the company’s strong rebuttal illustrate the ongoing friction between cautious traditional finance and the crypto industry’s drive for independence. Although the current environment is relatively stable, the stakes remain high for both stablecoins and Bitcoin as their roles and applications continue to expand.