On Monday, decentralized finance, or DeFi, protocol Compound Treasury announced it received a credit score of B- from S&P Global Ratings. As relayed through they at Compound, this represents the very first time a significant legal action has issued a rating to have an institutionalized DeFi protocol. The S&P Global Ratings’ investment appropriateness scale ranges from AAA (very strong) to D (in arrears). A score of B- signifies the issuer can meet financial budget, though vulnerabilities to business, financial and economic conditions persist.
Regarding Compound’s rating particularly, S&P Global cites the uncertain regulatory regime for stablecoins for example USD Gold coin (USDC), stablecoin-to-fiat convertibility risks and also the Treasury’s “limited capital base” plus a 4.00% per year return obligation for that decision. However, the rating agency states the Compound protocol’s record of zero losses measured in USDC partly mitigates the potential risks from the offering.
According to the development, Compound Treasury’s gm Reid Cuming commented “S&P’s rating helps our institutional clients easier comprehend the chance and perils of crypto-powered cash management.” Included in ongoing discussions with S&P Global, Compound Treasury’s ratings might be upgraded in case of greater regulatory clearness for digital assets or perhaps a longer history of solid performance.
The Compound Treasury and it is yield is based on its underlying DeFi lending Compound protocol. During the time of publication, 301,650 suppliers have injected $6.94 billion price of digital assets in to the protocol, while 9,275 borrowers took out $1.83 billion price of loans. While over the savings rates of major U.S. banks, the yield from Compound Treasury is just accessible to accredited investors or individuals meeting significant earnings and internet worth thresholds.