S&P Global Ratings, a prominent financial data analysis firm, has introduced a stability assessment for stablecoins. This assessment evaluates cryptocurrencies based on their ability to maintain a stable value against fiat currencies. The ratings range from 1 to 5, with 1 indicating strong stability and 5 indicating weakness.

Gemini Dollar and Circle’s USDC have received the highest ratings from S&P, scoring a 2 and categorized as “vital.” On the other hand, Tether’s USDT and stablecoins like Frax and Dai have received a rating of 4, considered “constrained.” S&P attributes these lower scores to risky reserve assets and a lack of transparency in management procedures.

The rating of 4 for USDT suggests that it may face challenges in consistently maintaining its peg to the US dollar. S&P has identified several weaknesses in Tether’s operations, including limited reserve management and risk appetite transparency, absence of a regulatory framework, no asset segregation to protect against the issuer’s insolvency, and limitations to USDT’s primary redeemability.

Despite these concerns, USDT has demonstrated notable price stability recently, even during significant crypto market volatility events.