S&P Global Ratings has released stability ratings for leading stablecoins, a significant step toward connecting the traditional and decentralized finance sectors.
S&P uses an analytical approach to rank stablecoins on a 1-5 scale, with 1 being very strong and 5 being weak, based on its risk assessment expertise. This evaluation takes into account a variety of characteristics such as asset quality, over-collateralization, liquidation processes, and more.
Initially, eight major stablecoins have been rated. The Gemini dollar (GUSD), Pax Dollar (USDP), and USD Coin (USDC) all obtained a 2 grade. This grade of 2 means they are considered strong coins. With a grade of 4, Dai (DAI), First Digital USD (FDUSD), and Tether (USDT) were deemed constrained. TrueUSD (TUSD) and Frax (FRAX) obtained a weak rating of 5.
According to S&P, stablecoins will become increasingly integrated into financial markets, acting as a vital link between digital and traditional assets. It cautions, however, that these coins are not immune to certain dangers that could lead them to fall below or increase over their objective value.
