The world of stablecoins has taken a significant step toward institutional credibility with the introduction of formal risk assessments by Standard & Poor’s (S&P Global). As one of the most respected names in financial credit ratings, S&P has launched a comprehensive evaluation framework to assess the stability and resilience of major stablecoins. The results are revealing: Circle’s USDC emerges as a leader with a strong rating, while Tether’s USDT and MakerDAO’s DAI receive only a marginal passing score.
This new assessment provides investors, institutions, and regulators with a clearer picture of which stablecoins offer greater reliability — a critical factor in an industry where trust and transparency are paramount.
How S&P Global Evaluates Stablecoin Risk
S&P Global’s stablecoin evaluation model is built on a 1-to-5 scoring system, where 1 represents the strongest stability and 5 indicates high vulnerability. The methodology prioritizes asset quality risk, analyzing three core areas:
- Credit risk: Likelihood of default in reserve assets
- Market value risk: Volatility and liquidity of underlying holdings
- Custody risk: Security and transparency of asset storage
After assessing these foundational risks, S&P applies adjustments based on five additional qualitative factors:
- Governance – Decision-making structure and transparency
- Legal and regulatory framework – Compliance and jurisdictional clarity
- Redeemability and liquidity – Ease of converting stablecoin to fiat
- Technology and third-party reliance – Smart contract security and dependency risks
- Track record – Historical performance during market stress
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Only after combining quantitative asset analysis with these qualitative overlays does S&P assign a final score — offering a holistic view of each stablecoin’s resilience.
USDT Receives “Constrained” Rating Amid Transparency Concerns
Tether’s USDT, despite dominating the market with over $90 billion in circulation, received a concerning score of 4 (Constrained) — just one point above the lowest possible rating.
While USDT’s reserves are primarily composed of U.S. Treasury bills and cash equivalents, S&P flagged the presence of high-risk assets with limited disclosure. The lack of transparency around custodians, counterparties, and banking partners raises red flags, especially during periods of financial stress.
Additional weaknesses highlighted include:
- Limited transparency in reserve management and risk appetite
- Absence of a clear regulatory framework
- No legal asset segregation to protect users if Tether were to face insolvency
- Restricted primary redeemability, meaning only large institutional clients can directly exchange USDT for dollars
These structural concerns suggest that while USDT remains dominant in market share, its long-term stability may be more fragile than perceived.
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USDC Earns Strong 2 Rating, Falls Just Short of Top Score
Circle’s USDC achieved the best asset quality score — a perfect 1 — thanks to its conservative reserve composition: primarily short-term U.S. Treasuries and bank deposits held within the Circle Reserve Fund (CRF), managed by BlackRock and registered with the SEC.
Key strengths include:
- Full collateralization (over 100% backing)
- Minimal exposure outside CRF (only 5% of assets)
- High transparency in audits and reporting
However, USDC was downgraded to a final score of 2 (Strong) due to lingering concerns about bankruptcy remoteness. While Circle claims reserves are legally segregated, S&P noted there is no legal precedent confirming whether those assets would remain protected in the event of corporate insolvency.
Despite this caveat, USDC stands out as one of the most trustworthy fiat-backed stablecoins available today.
DAI Penalized for RWA Exposure and Governance Risks
MakerDAO’s DAI, often praised for its decentralized design, received a disappointing score of 4, largely due to its growing reliance on real-world assets (RWA) like corporate bonds and private credit.
S&P expressed concern that these RWAs introduce:
- Elevated credit risk compared to cash or Treasuries
- Liquidity constraints during market downturns
- Centralization in governance decision-making
Additionally, DAI’s untested liquidation mechanisms and reliance on volatile collateral types raise doubts about its ability to maintain parity under stress. Secondary market liquidity also remains a concern, particularly during crypto market sell-offs.
While DAI aims to blend DeFi innovation with stability, S&P’s assessment suggests it still carries significant structural vulnerabilities.
TUSD Receives Lowest Possible Score Amid Opaque Reserves
TrueUSD (TUSD) was rated 5 (Very Constrained) — the worst possible score — due to severe transparency gaps.
S&P found insufficient information about:
- The nature of reserve assets
- Identity and jurisdiction of custodial institutions
- Legal segregation of user funds
TUSD claims its reserves are held in deposit institutions across Hong Kong, Switzerland, and the Bahamas, with some reinvested for yield generation. However, these arrangements fall outside the scope of independent audit reports, making verification difficult.
Despite rapid growth in 2025, TUSD continues to face scrutiny over its ties to controversial figures in the crypto space — further eroding institutional confidence.
Other Stablecoin Ratings at a Glance
S&P also evaluated four additional stablecoins:
- GUSD (Gemini Dollar): Scored 2 (Strong) – backed by regulated U.S. institutions with strong governance
- USDP (Pax Dollar): Also rated 2 – similar transparency and reserve quality to USDC
- FRAX: Received 5 – hybrid model introduces complexity and unproven risks
- FDUSD (Fuda Stablecoin): Rated 4 – limited public data on reserves and custody
Market Dominance vs. Stability: USDT Leads Despite Low Score
Despite its low S&P rating, USDT remains the most widely used stablecoin, with a market capitalization exceeding $90 billion, according to CoinGecko. In comparison:
- USDC: ~$24 billion
- DAI: ~$5.2 billion
- TUSD: ~$2.6 billion
This disconnect between market adoption and institutional trust underscores a critical point: popularity does not equal safety.
Investors may favor USDT for its liquidity and trading depth, but those prioritizing capital preservation should consider higher-rated alternatives.
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Frequently Asked Questions (FAQ)
Q: What does an S&P stablecoin rating of 1 mean?
A: A score of 1 ("Extremely Strong") indicates minimal risk in asset quality, governance, and legal structure. No stablecoin has achieved this yet.
Q: Is USDC safer than USDT according to S&P?
A: Yes. USDC received a 2 ("Strong"), while USDT scored 4 ("Constrained"), reflecting superior transparency and lower risk in USDC’s design.
Q: Why did DAI get a low rating despite being decentralized?
A: Decentralization doesn’t eliminate risk. S&P cited exposure to real-world assets, governance concentration, and unproven liquidation mechanisms as key weaknesses.
Q: Can stablecoin ratings change over time?
A: Absolutely. Ratings are dynamic and depend on reserve composition, regulatory developments, and operational transparency.
Q: Does a higher S&P score guarantee no depeg risk?
A: No rating eliminates all risk. However, higher scores indicate stronger structural safeguards that reduce the likelihood of depegging during crises.
Q: Are algorithmic stablecoins included in this assessment?
A: Not currently. S&P focused on asset-backed stablecoins. Algorithmic models like the original UST were excluded due to inherent instability risks.
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