S&P Global Ratings, a well-known rating agency and credit rating provider, announced a comprehensive series of stability assessments for various altcoins on December 12. This important initiative involves rating each stablecoin’s stability strength on a five-point scale, taking into account factors such as asset quality, governance and liquidity. Lapo Guadagnuolo, senior analyst at S&P Global Ratings, highlighted the increasing integration of stablecoins into financial markets and noted their importance as a bridge between digital and real-world assets.
USDC is a strong competitor
In an exclusive report, S&P Global described Circle’s USD Coin (USDC) as one of the strongest stablecoins on the market, attributing its strength entirely to the fact that it is backed by low-risk assets. S&P, which initially gave the best possible rating of 1, lowered the rating to 2 due to concerns about preserving assets in the event of Circle’s bankruptcy.
S&P Global flagged Tether (USDT) for limitations in maintaining its fiat peg, giving it a rating of 4, the second-worst rating possible. In addition to the lack of transparency regarding the parties involved in USDT reserves, the assessment also included concerns about reserve management, risk appetite, regulatory framework and asset segregation in case of issuer bankruptcy.
Other altcoins: FDUSD, DAI…
Other stablecoins, including First Digital USD (FDUSD) and Dai (DAI), received similar restricted ratings. TrueUSD (TUSD) and Frax (FRAX) were determined as the weakest, receiving 5 points. S&P Global’s assessment reflects the dynamic nature of stablecoins, with considerations beyond market value covering factors such as custody risks and credit.
What did the experts say?
S&P Global Ratings, led by senior analyst Lapo Guadagnuolo, reiterated that the surge in stablecoin growth does not make them immune to risk factors. Examining stablecoin quality, asset support, and overall risk management, the assessment aims to provide insight into the stability of these crypto assets. Mohamed Damak, senior director at S&P Global Ratings, highlighted the general feedback regarding the stablecoin market and emphasized the need for transparency. S&P’s commitment to evaluating the evolving universe of coins and use cases reflects its commitment to providing valuable insight in a rapidly changing environment.
Beyond stablecoins, S&P Global Ratings has a keen interest in monitoring the broader crypto asset sector, focusing on operational and legal risks, Blockchain oracle risk, crypto regulations and digital bonds. As the cryptocurrency landscape continues to evolve, S&P remains at the forefront by providing in-depth analysis to guide market participants and investors.
