S&P Global assigns ‘B-’ credit rating to Sky Protocol, first for DeFi protocol
Main Idea
S&P Global assigned a 'B-' credit rating to Sky Protocol, highlighting concerns over its stablecoin stability, capitalization, and regulatory risks, while noting its minimal credit losses and earnings since 2020.
Key Points
1. S&P Global assigned a 'B-' issuer credit rating to Sky Protocol, a decentralized finance (DeFi) platform, marking its first evaluation.
2. Sky Protocol's USDS stablecoin received a '4' (constrained) rating for its ability to maintain its peg to the US dollar, with concerns over its stability module and credit losses.
3. Primary concerns include governance uncertainty, weak capitalization (risk-adjusted capital ratio of 0.4%), and regulatory risks, partially offset by minimal credit losses since 2020.
4. S&P's assessment lowered Sky Protocol's anchor rating to 'bb', four notches below the US bank anchor, reflecting its higher risk profile.
5. Comparatively, Circle's USDC received a '2' (strong) rating, while Tether and USDS ranked '4' (constrained), with USDS noted for its complex asset base.
Description
S&P Global’s credit rating of Sky Protocol reflects key concerns over governance centralization, weak capitalization and regulatory uncertainty.
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