S&P Global Ratings has warned that stablecoin issuer Tether’s USDT could lose its 1:1 peg with the U.S. dollar due to some of the assets the digital token is backed by, namely the recently declining Bitcoin.

Credit ratings provider S&P Global said Wednesday that USDT could become “undercollateralized” if the assets backing the industry-leading stablecoin decline in value. S&P downgraded the coin’s ability to stay at a stable value, giving it a “weak” rating.

S&P Global added that Tether doesn’t provide clear enough information on its custodians, counterparties, or bank account providers.

“A drop in the Bitcoin’s value, combined with a decline in value of other high-risk assets, could therefore reduce coverage by reserves and lead to USDT being undercollateralized,” the report read. 

“A large share of USDT’s reserves remains invested in short-term U.S. treasury bills and other U.S. dollar cash equivalents,” it said. “However, Tether continues to provide limited information on the creditworthiness of its custodians, counterparties, or bank account providers.”

It added: “We have observed other weaknesses. These include limited transparency on reserve management and risk appetite, lack of a robust regulatory framework, no asset segregation to protect against the issuer’s insolvency, and limitations to USDT’s primary redeemability.”

USDT is the most-traded digital coin in the crypto world and the third-biggest digital asset by market cap. According to CoinGecko, $76.9 billion in USDT tokens have traded across exchanges worldwide over the past 24 hours.

Issued by El Salvador-based firm Tether, the stablecoin is used mostly by traders to enter and exit crypto transactions without using traditional banks.

USDT is sold as a digital dollar as, according to Tether, reserves of dollars, treasuries and other assets back the token so it keeps a stable value to the dollar. Stablecoins are widely considered to be the backbone of the crypto economy.

Regulators have opened investigations into—and even sued—Tether for allegedly not being transparent enough about what backs its reserves. The company has previously said that it is open to being independently audited by one of the Big Four accounting firms.

Tether said in a statement Wednesday that it “strongly disagrees” with S&P Global’s rating.

“USDT has operated for more than a decade and has consistently maintained full resilience through banking crises, exchange failures, liquidity shocks, and extreme market volatility,” the statement read. 

“Throughout its history, Tether has never refused a redemption request from a verified user,” it added.

The firm’s CEO, Paolo Ardoino, wrote on X Wednesday that Tether wasn’t upset about the rating.

“We wear your loathing with pride,” he said. “The classical rating models built for legacy financial institutions historically led private and institutional investors to invest their wealth into companies that, despite being attributed investment grade ratings, collapsed, pushing worldwide regulators to challenge such models, the independence and objective assessment of all major rating agencies.”

A Tether spokesperson told Decrypt that USDT adoption was increasing as more people find use cases for the token.

Stablecoins have in the past lost their peg to the dollar. In 2023, USDC, the fourth-most-traded cryptocurrency by market cap, dropped in value to 87 cents per token after the company behind the token, Circle, announced it had cash reserves that back the asset held at Silicon Valley Bank, which was shut down by California financial regulators after a bank run.

And in 2022, crypto project Terra blew up after its algorithmic UST stablecoin failed to keep its stable peg, leaving a $40 billion black hole in the crypto industry—and causing a number of bankruptcies in the space.