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S&P Global Ratings Launches Stablecoin Stability Assessment

Author

Jay Solano

Tags

Tags Editor's Choice / Slider Posts

Reading time

2 mins
Last update

Author

Jay Solano

Tags

Editor's Choice / Slider Posts

Reading time

2 mins
Last update

Author

Jay Solano

Tags

Editor's Choice, Slider Posts

Reading time

2 mins
Last update

stablecoins

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S&P Global Ratings, blending traditional and decentralized finance (DeFi) sectors, has introduced its stablecoin stability assessment tool. This innovative system is designed to evaluate the ability of stablecoins to maintain their peg to fiat currencies.

The new assessment framework by S&P Global Ratings assigns grades to stablecoins on a scale of 1 (very strong) to 5 (weak). This grading provides a nuanced understanding of the stability of various stablecoins. The evaluation process involves a detailed examination of several key factors, including credit risks, market value, custody issues, over-collateralization requirements, and liquidation mechanisms.

Initially, this assessment encompasses eight leading stablecoins: DAI, FDUSD, FRAX, GUSD, USDP, tether (USDT), TUSD, and USDC. These assessments offer in-depth insights into each stablecoin’s capacity to maintain value relative to a fiat currency, leveraging S&P’s established analytical methods.

Lapo Guadagnuolo, a senior analyst at S&P Global Ratings, highlighted the increasing relevance of stablecoins in financial markets, noting their role as bridges between digital assets and real-world finances. However, he also pointed out the inherent risks of stablecoins, such as asset quality, governance, and liquidity, which make comprehensive assessments crucial.

Chuck Mounts, the chief DeFi officer at S&P Global Ratings, expressed his excitement about the launch. He emphasized that this new service aligns with the current trends in the digital asset market and aims to provide clients with essential insights for informed decision-making. This initiative by S&P Global Ratings follows a similar stablecoin assessment tool offered by Moody’s Analytics.

In the initial rankings, USD Coin (USDC) and Pax Dollar (USDP) lead the pack, scoring a 2. TrueUSD (TUSD) and FRAX Dollar (FRAX) were rated a 5, falling into the “weak” category. DAI, FDUSD, and tether (USDT) received a 4, categorized as “constrained.” The Gemini Dollar (GUSD) scored 2, reflecting a “strong” status among the eight assessed stablecoins.