S&P Global Ratings today announced the opening of its stablecoin stability assessment, aiming to assess a stablecoin’s capacity to sustain a stable value in comparison to a fiat currency.
This is a big step forward for the company’s commitment to supporting traditional finance (TradFi) and the expanding group of crypto-native decentralized finance (DeFi) clients by utilizing its strong analytical and risk assessment capabilities.
Instead of using the triple-A to default range that S&P uses for governments and corporations, its risk scale will go from 1 to 5, but the emphasis will still be on the benefits and drawbacks.
The most popular stablecoin, Tether, and the fourth-most popular stablecoin, Dai, both received “constrained” 4 ratings in the new system while TrueUSD, the fifth-most popular stablecoin, received a “weak” 5 score.
S&P analyst Lapo Guadagnuolo stated, “For us, the assets (backing the stablecoins) are the most fundamental starting point,” adding that the growing acceptance of stablecoins as a form of payment was a major factor in the scoring system.
Frax, another coin, received a score of 5. First place stable coin Digital USD received a rating of 4, while second place stablecoin USD Coin, along with Gemini Dollar and Pax Dollar, received a “strong” 2 rating.
Stablecoins that require over-collateralization and have mechanisms in place for early liquidation or support against “adverse movement in the value of the assets” also aim to lower the risks associated with their underlying assets.
Also Read: Tether (USDT) Booming on the Crypto Market: A Stablecoin’s Ascent
