Moody’s takes on stablecoins: New ratings spotlight redemption risks, not returns
Moody’s Ratings is diving into the $300 billion stablecoin market with a new rating system.
- Moody’s is proposing a new system to rate stablecoins based on reserve quality, market value risk, and operational safeguards.
- The firm aims to provide investors with a clearer picture of redemption reliability.
- Ratings would be determined by the “weakest link” in a stablecoin’s reserve pool, factoring in liquidity, governance, regulatory context, and technology risks, while algorithmic stablecoins are excluded.
The venerable 116-year-old credit rating firm unveiled a proposal to assess stablecoins like any other deposit: by looking at the quality of reserve assets, market value risk, and operational safeguards.
Public comments are open until Jan. 29.
Why it matters
Stablecoins have been quietly sneaking into banks, corporate treasuries, and payment systems, all while being pegged to the dollar. The U.S. has even passed the Genius Act to regulate them.
Moody’s hopes its ratings can shed light on this “still evolving and often opaque” market, without inadvertently predicting the next crypto rollercoaster.
According to Bloomberg News, Moody’s would evaluate the credit quality of every asset in a stablecoin’s reserve pool, factor in market value, and then take the lowest score (the “weakest link,” or the lowest-rated asset among the token’s reserves).
Liquidity, governance, regulatory context, and tech risks like blockchain forks all factor in. Short-term government securities and cash deposits earn brownie points, while algorithmic stablecoins are excluded.
Notably, stablecoin issuers would have to pay for the assessment. The ratings won’t tell you whether a coin will make you rich—or melt your savings—they’re purely about redemption reliability: can you get your dollars back when you want them?
In the past, Moody’s has examined the efficiency gains from investing in assets such as government bonds through tokenized funds. It also assigned an AA rating to the SGD Delta Fund, the first fund to use Standard Chartered’s SC Ventures Libeara tokenization platform.
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