S&P Global Assigns B- Rating to Sky Protocol Amid Governance and Capitalization Concerns in DeFi Landscape

Key Points

1. S&P Global's B- rating for Sky Protocol indicates vulnerabilities in governance and capitalization, marking the first time a major credit rating agency has evaluated a DeFi platform.

2. Sky Protocol’s USDS stablecoin is the fourth-largest by market cap, valued at roughly $5.36 billion, but received a 'constrained' rating (4 out of 5) for its ability to maintain its peg to the US dollar.

3. Primary concerns include regulatory uncertainty, centralized governance with low voter turnout, and weak capitalization, with a risk-adjusted capital ratio of 0.4% as of July 27.

4. The protocol’s minimal credit losses and earnings since 2020 partially offset these risks, as noted by S&P Global’s digital assets analytical lead, Andrew O’Neil.

5. S&P’s assessment also lowered the protocol’s anchor rating to 'bb,' four notches below the US bank anchor, reflecting heightened scrutiny into the formal credit rating system.