S&P Global has unveiled a novel grading system tailored for the burgeoning stablecoin sector, casting a spotlight on the inherent risks of these digital assets. Amidst the increasing integration of stablecoins like Tether and Dai into the financial ecosystem, S&P has assigned them scores that signal caution, with Tether receiving a constrained score of 4 and Dai sharing the same assessment.
The rationale behind these scores is rooted in the transparency and quality of the underlying assets backing the stablecoins. Tether, which enjoys the status of being the most utilized stablecoin, has been marked down due to opaque disclosures regarding its reserve holdings. Although it boasts a substantial portion of U.S. government bonds and cash equivalents, the presence of “significant exposure” to riskier assets has raised eyebrows.
Similarly, TrueUSD has been tagged with a weak 5 rating, with S&P citing a complete lack of clarity on the reserve assets and the credit standing of the custodians. In contrast, USD Coin has emerged more favorably, securing a strong 2, indicative of a more robust and transparent backing.
This initiative by S&P reflects a meticulous approach, considering factors such as regulation, governance, and liquidity — all of which are crucial in determining the stability of these digital currencies. As S&P analyst Lapo Guadagnuolo succinctly puts it, “Stablecoin is just a name.” The recent turmoil with TerraUSD and Luna serves as a stark reminder that the label of stability can be misleading without a solid foundation to back it.
