S&P downgrade of USDT rating causes panic among cryptocurrency traders in China

Standard & Poor’s Global downgraded stablecoin Tether USDT’s stability rating from restricted to weak, citing increased exposure to volatile assets like Bitcoin. The move sparked intense debate on Chinese social media, with traders expressing concerns ranging from skepticism to extreme panic.

The exposure of timing is the most important for China’s underground cryptocurrency market. More than 20 million participants rely on the USDT as their main trading route Digital assetseven after the country is banned in 2021.

Standard & Poor’s notes concerns about reserve accumulation

male The official report of Standard & Poor’s Global Released on Wednesday, there are significant risks in the structure of Tether’s reserves. Bitcoin now makes up 5.6% of USDT trade, surpassing the previously announced low of 3.9%. S&P cited a lack of transparency and limited disclosure of reserve assets.

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According to Tether’s confirmation reports from Q1 to Q3 2025, the company owns $9.9 billion in Bitcoin and $12.9 billion in… gold. Together, these volatile assets make up about 13% of total reserves to support $174.4 billion in liabilities. Tether maintains reserves of $181.2 billion and has profits of more than $10 billion in the first three quarters of 2025.

The S&P analysis also highlighted exposure to riskier assets such as collateralized loans, corporate bonds and precious metals. The agency cited persistent lapses in disclosure practices, raising doubts about the long-term ability of the USDT to maintain its 1-to-1 peg with the US dollar. But Tether’s transparency reports show that US Treasury funds exceed $113 billion, which make up most of its reserves.

Mixed reactions from Chinese traders

The downgrade sparked intense debate in Chinese cryptocurrency circles, where USDT dominates trading. A veteran trader noticed However, negative news about Tether constantly floats without impact, often near market lows. This view shows how many remain skeptical of the incomplete warnings of stability in the past.

Other participants expressed Concern about potential repercussions. The concern centers around USDT’s key role as vital infrastructure for the growing but banned stablecoin community in China. Many platforms serving Chinese users operate under local management, creating close relationships between traders and markets denominated in USDT.

Conspiracy theories emerged around Coordinated attacks by stablecoin competitors USDC and USD1. Some analysts have argued that these rivals have much to gain from undermining USDT’s dominance, especially given the increased global regulatory scrutiny. The critics did Take the opportunity to promote USDC as the future of stablecoins, citing stronger transparency and better regulatory compliance.

The underground market is undergoing a stability test

China began enforcing a blanket ban on cryptocurrencies in 2017, culminating in 2021 with all transactions and mining outlawed. however, Show data More than 20 million Chinese citizens hold… Bitcoin By 2024, traders will use offshore exchanges, off-the-shelf platforms and private trades to bypass local restrictions.

USDT has emerged as a safety line for this shadow market, allowing Chinese investors to convert yuan into dollar-pegged tokens via unofficial channels. Social media sites such as Weibo and WeChat show continued interest in Bitcoin and cryptocurrency trading, with some exchange communities growing rapidly. This network relies on influencers and mentors to guide users through organizational barriers.

The scale of this activity explains why the Chinese crypto community was so affected by the S & P downgrade. Any disruption in USDT could cause chain reactions throughout the ecosystem without official recourse. Traders are exposed to higher risks due to the informal and unregulated nature of their markets.