S&P Global Ratings has assigned a B- credit rating to Sky Protocol, marking the first time a major credit rating agency has evaluated a decentralized finance (DeFi) platform. The rating indicates a vulnerable credit profile, reflecting significant concerns over governance, capitalization, and regulatory risks within the protocol.
Despite acknowledging Sky Protocol’s minimal credit losses and earnings since its inception in 2020, S&P Global highlighted substantial vulnerabilities. Key issues include regulatory uncertainty surrounding DeFi, highly centralized governance exacerbated by low voter turnout, and weak financial standing. As of July 27, Sky Protocol’s risk-adjusted capital ratio was a minimal 0.4%.
Sky Protocol’s native stablecoin, USDS, ranked as the world’s fourth-largest stablecoin by market value at approximately $5.36 billion, received a separate ‘constrained’ assessment (rated 4 out of 5) for its ability to maintain its peg to the US dollar. Andrew O’Neil, S&P Global’s analytical lead for digital assets, noted that the platform’s minimal credit losses and earnings provided only a partial counterbalance to these risks.
S&P’s analysis also resulted in the protocol receiving an anchor rating lowered to ‘bb,’ placing it four notches below the typical US bank anchor, underscoring the heightened scrutiny and unique challenges associated with incorporating DeFi entities into the formal credit rating system.