Oh, what a tale of modern sorcery and digital alchemy! S&P Global Ratings, the esteemed soothsayers of the financial world, have deigned to bestow upon us mere mortals a glimpse into the mysterious realm of decentralized finance (DeFi). They have assigned a B- issuer credit rating to none other than Sky Protocol, once known as Maker Protocol, marking the first time a major credit rating agency has ventured into this ethereal domain. 🌌✨
In a world where the value of a coin can be as fickle as the weather, S&P has taken it upon themselves to assess the stability of these digital wonders. This endeavor, which began in 2023, aims to evaluate the ability of stablecoin issuers to maintain a steady value relative to the good old-fashioned fiat currencies. The review delves deep into the creditworthiness of Sky’s liabilities, the USDS and DAI stablecoins, and the sUSDS and sDAI savings tokens. 🤔💰
For the first time, Sky Protocol has been placed under the microscope, receiving a “4” – labeled “constrained” – for USDS’s ability to maintain its peg to the US dollar. On a scale where “1” signifies a strength akin to the mighty oak and “5” the fragility of a dandelion, Sky finds itself somewhere in between. 🍀💔
Sky Protocol, a platform where one can borrow cryptocurrency-backed loans as if they were borrowing from the gods themselves, boasts the USDS stablecoin. This coin, used to facilitate the mystical exchanges of lending and borrowing, stands as the fourth-largest by market cap, with a staggering $5.36 billion at the time of writing, according to the oracles of CoinMarketCap. 📊🌟
S&P defines a default on the protocol’s liabilities as “a haircut imposed on token holders.” Now, imagine if your hairdresser decided to take a bit more off the top than you bargained for! Key risks that could lead to such a misfortune include depositor withdrawals outpacing the available liquidity in the peg stability module and credit losses exceeding the available capital. 😱💸
Government, Capitalization, and Regulatory Risk: The Unseen Hands of Fate
The S&P rating points to several chinks in the armor of this digital fortress, including a high concentration of depositors, centralized governance, reliance on the founder, and the ever-present specter of regulatory uncertainty. These risks are somewhat mitigated by the protocol’s minimal credit losses and earnings since 2020. 🛡️🔮
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S&P’s assessment also lowered the protocol’s anchor rating to “bb,” four notches below the US bank anchor of “bbb+,” citing the nebulous regulatory landscape in the DeFi sector. 🌪️⚖️
Stablecoin Issuers Under the Magnifying Glass
As the digital and traditional financial worlds continue to intertwine, more institutions within the crypto space find themselves under the watchful eye of the formal credit rating system. S&P Global launched its stablecoin stability assessment in December 2023, and the results are as varied as the flavors of ice cream. Circle USDC (USDC) received a rating of 2 (strong), while Tether (USDT) and USDS ranked 4 (constrained). 🍦📊
“Tether’s weaknesses lie in transparency, whereas 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,” O’Neil explained. 📝🤔
The first blockchain-based mortgage securitization to receive a rating from S&P Global was Figure Technology Solutions, a platform that conjures a blockchain-based marketplace for financial products. In June, Figure’s latest securitization of mortgage assets, totaling $355 million, was awarded an “AAA” rating by S&P Global. 🏦🌟
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2025-08-11 10:57