China’s Crypto Traders Panic as S&P Downgrades Tether’s USDT
S&P Global Ratings downgraded Tether’s USDT stablecoin stability rating from constrained to weak, citing elevated publicity to unstable belongings like Bitcoin. This transfer triggered intense debate on Chinese social media, with merchants expressing considerations starting from skepticism to outright panic.
The timing is crucial for China’s underground crypto market. Over 20 million contributors rely upon USDT as their main path to digital asset trading, even after the nation’s 2021 ban.
S&P Flags Reserve Composition Concerns
The official S&P Global report launched on Wednesday highlights vital dangers in Tether’s reserve construction. Bitcoin now makes up 5.6% of circulating USDT, exceeding the beforehand acknowledged buffer of three.9%. S&P pointed to inadequate transparency and restricted disclosure of reserve belongings.
According to Tether’s Q1–Q3 2025 attestation studies, the corporate holds $9.9 billion in Bitcoin and $12.9 billion in gold. Combined, these unstable belongings account for about 13% of whole reserves backing $174.4 billion in liabilities. Tether maintains $181.2 billion in reserves and has generated over $10 billion in revenue within the first three quarters of 2025.
S&P’s evaluation additionally highlighted publicity to high-risk belongings, such as secured loans, company bonds, and valuable metals. The company famous ongoing gaps in disclosure practices, elevating doubts about USDT’s long-term means to maintain its 1-to-1 peg with the US greenback. However, Tether’s transparency studies present US Treasury holdings of greater than $113 billion, accounting for many of its reserves.
Chinese Traders React With Mixed Emotions
The downgrade sparked a heated debate inside Chinese crypto circles, the place USDT dominates buying and selling. One veteran trader noted that unfavorable information about Tether often surfaces with out impact, typically close to market lows. This view exhibits what number of stay skeptical of stability warnings that haven’t come true up to now.
Other contributors expressed concern about the potential fallout. The nervousness facilities round USDT’s key function as very important infrastructure for China’s thriving however banned stablecoin crypto neighborhood. Many exchanges serving Chinese customers function below native administration, creating deep ties between merchants and USDT-denominated markets.
Meanwhile, conspiracy theories emerged about coordinated assaults by stablecoin rivals USDC and USD1. Some analysts argued that these opponents have a lot to achieve from undermining USDT’s dominance, notably as international regulatory scrutiny intensifies. Critics took the chance to advertise USDC as the way forward for stablecoins, citing stronger transparency and regulatory compliance.
Underground Market Faces Stability Test
China started complete cryptocurrency bans in 2017, culminating in 2021 with the outlawing of all crypto transactions and mining. Yet, data shows greater than 20 million Chinese residents maintain Bitcoin as of 2024. Traders use abroad exchanges, over-the-counter platforms, and personal offers to bypass native restrictions.
USDT emerged as a lifeline for this shadow market, enabling Chinese traders to transform yuan into dollar-linked tokens by means of casual channels. Social media websites like Weibo and WeChat present steady curiosity in Bitcoin and crypto buying and selling, with fast progress in some trade communities. This community depends on influencers and so-called “sign academics” to information customers by means of regulatory boundaries.
This exercise’s scale explains why the S&P downgrade resonated so strongly in Chinese crypto communities. Any disruption to USDT might set off a sequence response throughout an ecosystem with no official recourse. Traders face increased dangers because of the casual and unregulated nature of their markets.
The publish China’s Crypto Traders Panic as S&P Downgrades Tether’s USDT appeared first on BeInCrypto.
