A Crypto Stablecoin Scoring System is Being Developed by Moody'sTable of Contents
A Crypto Stablecoin Scoring System is Being Developed by Moody's
By CoinUnited.io Research Team
2 min read
A source familiar with the plans who requested not to be identified discussing private information said that the system will involve an evaluation of up to 20 stablecoins depending on the quality of attestations on the reserves supporting them.
Stablecoins are digital tokens that are pegged in value to a less volatile asset, most often the US dollar, with the goal of providing investors with a stable return. This is because their issuers often hold a minimum quantity of the corresponding asset in reserve.
Another source familiar with the concept said that the initiative is still in its infancy and does not yet represent an official credit rating. Moody's declined to provide a statement. Its research division releases industry-wide analytical studies, while the company's credit rating division assigns credit ratings to publicly listed crypto firms like Coinbase Global Inc.
Tether's USDT, the largest stablecoin, has been under growing scrutiny over the years as doubts have been raised regarding the assets allegedly supporting the currency. In 2021, Tether, a company whose dollar-pegged stablecoins are worth $67 billion, was penalized by US regulators for misrepresenting its reserves.
Third-party audit companies certify to the accuracy of public reserve attestations on a monthly or quarterly basis. Some stablecoins, like MakerDAO's DAI, are more experimental and rely on other cryptocurrencies to maintain their pegs, as opposed to the traditional collateral stacks of short-term US Treasury notes.
Stablecoins are gaining popularity as a way for banks and other traditional financial institutions to utilize distributed ledger technology. Some companies even went so far as to create their own tokens, like JPMorgan's JPM Coin, which will be used for internal payments starting in 2019.
Due to the failure of its algorithmic stablecoin TerraUSD, which attempted to preserve its dollar-peg through a complicated system of code and trading incentives, the whole crypto sector was rocked in May when the Terra ecosystem imploded.
In response, regulators cracked down on the lack of transparency among stablecoin issuers, which subsequently dragged crypto values down and wiped out some of the industry's top players.
Stablecoins are digital tokens that are pegged in value to a less volatile asset, most often the US dollar, with the goal of providing investors with a stable return. This is because their issuers often hold a minimum quantity of the corresponding asset in reserve.
Another source familiar with the concept said that the initiative is still in its infancy and does not yet represent an official credit rating. Moody's declined to provide a statement. Its research division releases industry-wide analytical studies, while the company's credit rating division assigns credit ratings to publicly listed crypto firms like Coinbase Global Inc.
Tether's USDT, the largest stablecoin, has been under growing scrutiny over the years as doubts have been raised regarding the assets allegedly supporting the currency. In 2021, Tether, a company whose dollar-pegged stablecoins are worth $67 billion, was penalized by US regulators for misrepresenting its reserves.
Third-party audit companies certify to the accuracy of public reserve attestations on a monthly or quarterly basis. Some stablecoins, like MakerDAO's DAI, are more experimental and rely on other cryptocurrencies to maintain their pegs, as opposed to the traditional collateral stacks of short-term US Treasury notes.
Stablecoins are gaining popularity as a way for banks and other traditional financial institutions to utilize distributed ledger technology. Some companies even went so far as to create their own tokens, like JPMorgan's JPM Coin, which will be used for internal payments starting in 2019.
Due to the failure of its algorithmic stablecoin TerraUSD, which attempted to preserve its dollar-peg through a complicated system of code and trading incentives, the whole crypto sector was rocked in May when the Terra ecosystem imploded.
In response, regulators cracked down on the lack of transparency among stablecoin issuers, which subsequently dragged crypto values down and wiped out some of the industry's top players.
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