Stablecoin Assessments
S&P Global Ratings can provide stablecoin credit ratings, which focus on the stablecoin’s ability to redeem on demand, and stablecoin stability assessments, which focus on the capacity of a stablecoin to maintain its peg to a fiat currency or basket of currencies.
What are Stablecoins?
A stablecoin is a digital asset that is designed to be used as a means of payment or settlement on a blockchain. They are pegged to a fiat currency, such as the U.S. dollar, in an effort to maintain a stable value.
Stablecoins are generally issued by private sector entities and are increasingly becoming subject to dedicated legal and regulatory frameworks. They enable cash-like transactions on a blockchain which is a necessary capability for the use of tokenization and broader digital asset market infrastructure. Relative to other blockchain-based payment instruments (e.g. central bank digital currencies and tokenized bank deposits) stablecoins provide a more ‘open loop’ solution that can be used beyond the universe of entities dealing directly with a central bank or the client base of a specific financial institution.
Our Stablecoin Stability Assessment Approach
Our analytic approach begins with the assessment of asset quality risks, including credit, market value, and custody risks. We further analyze to what degree overcollateralization requirements and liquidation mechanisms may mitigate these risks (light gray box). Through a combination of these factors, we determine an asset assessment score that ranges from 1 (very strong) to 5 (weak) (black box).
Following the Asset Assessment, our analytic approach considers five additional areas (dark gray boxes):
• Governance
• Legal and regulatory framework
• Redeemability and liquidity
• Technology and third-party dependencies, and
• Track record
The strengths and weaknesses for each of these five areas add to the holistic risk assessment view, which may lead to a negative adjustment to the Asset Assessment score. As a result, the stablecoin stability assessment (red box) can be in line with or lower than the asset assessment.
Our Stablecoin Credit Ratings Approach
Stablecoins come in various forms and relevant credit risk factors include fundamental principles of credit risk in structured finance, financial institutions and fixed income funds.
Upon assessing the structure of a specific stablecoin issuer, we would utilize the relevant credit rating methodology (which may accordingly include some combination of structured finance, financial institutions, and fund ratings analytical considerations).
Below we highlight the differences between our Stablecoin Stability Assessments and our Stablecoin Credit Ratings.
Stablecoin Stability Assessment
Stablecoin Credit Rating
Why S&P Global Ratings?
Highly Informed
The Stablecoin Stability Assessment culminated from essential insights gathered in numerous deep-dive interviews with key market participants in the traditional finance and digital assets sectors.
Expertise
Our Digital Asset Lab is made up of credit and Cryptofinance analysts and researchers so we have a unique analytical understanding of the intersection of traditional finance and digital assets.
Track Record in Assessing Risk
With over 150 years of experience in providing independent opinions to the markets and more than 1 million credit ratings outstanding, we deliver essential intelligence to help market participants make informed decisions with conviction.
Investor Preference
Of the top 20 global institutional investors, 95% reference S&P Global Ratings.* We are an essential source of information for global financial markets.
*According to 3rd party investor survey conducted in 2023.
Stablecoin Stability Assessment Reports
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