S&P Stablecoin Rating Report: USDC Receives Highest Rating, USDT "Marginally" Scores 4

The credit rating agency S&P Global has started evaluating the risk of eight stablecoins globally. Tether's USDT and MakerDAO's DAI received a low rating of 4 points Constrained, while Circle's USDC received a higher rating of 2 points Strong.

Standard & Poor's Evaluation Method for Stablecoins

Standard & Poor's evaluation method for stablecoins focuses on assessing the quality of assets, including credit, market value, and custody risks, and then further analyzes the over-collateralization requirements and liquidation mechanisms. Scores range from 1 to 5, with 1 being the strongest and 5 being the weakest.

After asset evaluation, Standard & Poor's adjusts the analysis with an additional assessment in five areas outlined in the purple box, before finally assigning a score of 1 to 5 to the stablecoin:

• Governance

• Legal and regulatory framework

• Redeemability and liquidity

• Technology and third-party dependencies

• Track record

Tether Scores 4 Due to High-Risk Assets

In the latest assessment, the world's largest stablecoin issuer, Tether, received a score of 4, labeled as Constrained, due to the lack of information regarding the custodian, counterparties, or banking providers of USDT reserves. While most of its reserves consist of U.S. government bonds and cash equivalents, there are also substantial high-risk assets with limited disclosure.

Other weaknesses include limited transparency in reserve management and risk preferences, lack of a regulatory framework, absence of asset segregation to prevent issuer bankruptcy, and restricted redeemability of USDT.

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USDC Receives a Subpar Score of 2

USDC issued by Circle received the highest score of 1 in asset evaluation. Its low-risk asset reserves mainly consist of short-term U.S. Treasury bonds and bank deposits, held in BlackRock's SEC-registered Circle Reserve Fund (CRF) with a collateral ratio maintained at over 100%, and only 5% of assets outside the CRF.

However, USDC ultimately received a subpar score of 2, mainly due to Standard & Poor's questioning whether assets would be protected in the event of bankruptcy, despite reports claiming that reserves are separate from other assets, lacking precedents for evaluation.

RWA Issues Lead to DAI Scoring Only 4

Standard & Poor's observed that real-world assets (RWA) in DAI's treasury increase credit risks and raise concerns about liquidity, along with governance centralization, untested liquidation procedures, and worries about secondary market liquidity, resulting in a low score of 4.

TrueUSD Scores the Lowest at 5

Due to lack of information on reserve asset nature and holding institutions, Standard & Poor's rated TrueUSD as the lowest at 5.

The report states that its underlying assets consist of deposits from institutions in Hong Kong, Switzerland, and the Bahamas, with the Hong Kong institution also investing in other instruments for profit generation, and limited public information on the segregation of underlying assets beyond the scope of its independent auditor's report.

TrueUSD, the fastest-growing stablecoin this year, has been widely speculated to be linked to Justin Sun, with many controversial points of suspicion.

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Other Stablecoin Ratings

The scores for 4 other stablecoins are:

• GUSD: 2
• USDP: 2
• FRAX: 5
• FDUSD: 4

USDT Maintains Lead in Stablecoins with Total Market Cap of $90.5 Billion

According to the latest data from CoinGecko, USDT remains the leader in stablecoins with a total market cap of $90.5 billion, followed by USDC at $24 billion, DAI at $5.2 billion, and TUSD at $2.6 billion.