S&P Global Ratings has awarded a B-Emittent-Credit rating to Sky protocol, formerly known as a Maker Protocol, which is the first time that an important creditworthiness agency has issued a rating for a decentralized finance (Defi) platform.
The rating is part of the continuous assessment of S&P of Stablecoin -Emitents, who started in 2023 to evaluate their ability to retain a stable value compared to Fiat -Malutas. The assessment includes the creditworthiness of Sky’s liabilities, the USDS (USDS) and DAI (DAI) Stablecoins and the Suss and Sdai Savings -Tokens.
Sky Protocol, evaluated for the first time, received a “4” – with the label “limited” – for the capacity of USDS to retain its PEG to the US dollar. The scale runs from “1” for very strong to “5” for weak.
The Sky protocol is a decentralized credit platform with which users can borrow backed loans through cryptocurrency. The USDS Stablecoin, used to facilitate lending and loan transactions, is the fourth largest due to market capitalization, with around $ 5.36 billion at the time of writing, according to Coinmarketcap.
S&P defines a standard on the liabilities of the protocol as “a hairstyle imposed on token holders.” It emphasizes important risks that such a standard setting can cause, including recordings that are available in the PEG -Stability Module and Credit Losses that exceed the available capital.
Government, capitalization and regulatory risk are the most important concerns
Related: Sky doubles at Token Revision: making MKR unusable, launching Subdaos
The S&P rating pointed to weaknesses in the protocol, including a high concentration of depositors, centralized administration, dependence on the founder, regulatory uncertainty and weak capitalization. These risks are partially compensated by the minimum credit losses and income from the protocol since 2020.
Andrew O’Neil, S&P Global’s Digital Assets Analytical Lead, Cointelegraph said: “A” B- “Rating means that we believe that the protocol can currently meet its financial obligations, but it would be vulnerable in unfavorable business, financial and economic circumstances.”
The Sky Ecosystem Asset-Liability Committee said that the process gave the chance to investigate both traditional counterparty risks and Defi-specific vulnerabilities such as Smart Contract, Oracle, Bridge and Governance 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 counterparty risks that are typical of TradFi but don’t necessarily apply on‑chain, and we also examined novel, DeFi‑native, risks – smart‑contract, Oracle, Bridge and Governance Risks – that must be monitored and mitigated carefully, “They Told Cointelegraph.
Co-founder of Sky Rune Christensen owns almost 9% of the Stokens. The assessment of S&P stated that “the management process of the protocol remains highly centralized because of the rise of low voters during important decisions.”
The capitalization of Sky is another primary care. According to the assessment, with a risk-corrected capital ratio of 0.4% from 27 July, the protocol has a limited surplus spare buffer to cover potential credit losses.
Sky’s Assets Source: S&P Global Ratings
The assessment of S&P also reduced the anchor assessment of the protocol to “BB”, four notches under the American bank anchor of “BBB+”, with reference to regulatory uncertainty in the Defi sector.
Stablecoin -publishers under increased control
As cryptocurrency continues to deepen its involvement in traditional financial markets, more institutions within the crypto room are brought into the formal creditworthiness system.
S&P Global launched its Stablecoin Stability Assessment in December 2023. According to the report, Circle USDC (USDC) received a rating of 2 (strong), while Tether (USDT) and USDS arranged 4 (limited).
“The weaknesses of Tether are more about transparency, while USDS has a more complex asset base compared to USDC. And indeed, the relatively weak capital position is also something that drives that relative ranking,” said O’Neil.
The first blockchain-based mortgage security to receive a rating from S&P Global was Figure Technology Solutions, a technology platform that drives a blockchain-based marketplace for financial products. In June, the latest securitization of mortgage assets received a total of $ 355 million, an “AAA” rating from S&P Global.
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