S&P Global expands credit ratings at crypto institutions, including stablecoins and digital ownership funds
S&P Global Ratings have appointed a B-Credit Rating rating to Sky Protocol, formerly known as Maker Protocol, who marked the first time a major credit rating agency released a rating for a decentralized financial platform (DeFI).
The rating is part of the ongoing S&P assessment of Stablecoin issues, which began in 2023 to assess their ability to maintain a stable value associated with fiat currencies. The review covers the credentials of Sky’s liabilities, the USDS (USDS) and Dai (Dai) Stablecoins and the susds and SDAi savings tokens.
The Sky Protocol, which was reviewed for the first time, received a “4” – labeled “forced” – for USDS’s ability to maintain its peg in the US dollar. The scale runs from “1” for very strong “5” for weak.
Sky Protocol is a decentralized lending platform that allows users to borrow cryptocurrency-supported loans. The USDS Stablecoin, used to facilitate lending and borrowing transactions, is the fourth largest through the market cap, with about $ 5.36 billion at the time of writing, According to In coinmarketcap.
S&P defined a default on protocol responsibilities as “a haircut imposed on token holders.” It highlights the basic risks that can trigger such a default, including deposits that exceed the liquidity available in the peg stability module and credit losses beyond available capital.
Government risk, capitalization and regulation are major concerns
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The S&P rating is directed to protocol weaknesses, including high concentrations of deposit, centralized management, reliance on the founder, uncertainty of regulation and weak capitalization. These risks have been partially a small losses and protocol income since 2020.
Andrew O’Neil, S&P Global’s Digital Assets Analytical Lead, told Cointelegraph, “A ‘B-‘ rating means we believe the protocol is currently able to meet financial obligations, but it is vulnerable to bad business, financial and economic conditions.”
The Sky Ecosystem Asset-Liability Committee said the process provided the opportunity to evaluate both traditional risks to counterparts and defi-specific weaknesses such as intelligent contracts, Oracle, Bridge and Management risks.
“As part of the interviews and documentation we shared with S&P, we had the opportunity to revisit and challenge some of the analytical assumptions behind the Rights of the Tradfi’s risk but we didn’t have to apply – chain, and we also checked the novel, defi – native, risks – intelligent contract, Oracle, tidings and management -take care,
Sky co-founder Rune Christensen holds about 9% of management tokens. The S&P analysis said that “the protocol management process remains highly centralized due to low voter voting in major decisions.”
Sky’s capitalization is another major concern. According to the analysis, with a capital -adjusted ratio at a risk of 0.4% to July 27, the protocol has a limited excessive buffer reserve to cover potential credit losses.
The S&P analysis also lowered the protocol’s anchor rating on “BB,” four notches under the US bank “BBB+,” citing uncertainty in regulation in the DeFI sector.
Those who gave stablecoin under the increasing investigation
As cryptocurrency continues to deepen its contact with traditional financial markets, more institutions within the crypto space are brought to the formal credit rating system.
S&P Global launched Stablecoin stability assessment in December 2023. As each report, Circle USDC (USDC) received a rating of 2 (strong), while tether (USDT) and the USDs are ranked 4 (forced).
“Tether’s weaknesses are more around the transparency, while the USDS has a more complex base of the USDC.
The first securitization -based blockchain -based mortgage to receive a rating from S&P Global is the Figure Technology Solutions, a market technology platform that gives the blockchain -based market strength for financial products. In June, the latest securitization of the figure of mortgage assets, worth $ 355 million, was awarded an “AAA” rating by S&P Global.
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