The first DeFi product to be certified by a credit rating agency! Compound Treasury receives a Standard & Poor's B- rating.
Compound Treasury, an institutional-grade DeFi product launched by the lending protocol Compound, has received a credit rating of B- from S&P Global, making it the first DeFi product to be rated by a major credit rating agency.
Table of Contents
Introduction to Compound Treasury
Compound Treasury is mainly designed for institutional investors. It converts investors' dollars into USDC and lends them on the Compound protocol, promising investors a fixed interest rate of 4% annually.
Standard & Poor's Credit Rating
On the 9th, Compound Treasury received a credit rating of B- from Standard & Poor's, citing the following main drawbacks:
- Low capitalization
- Regulatory risks related to the crypto industry
- Significant operational risks and complexity
- Convertible risks between private stablecoin USDC and fiat currencies
- Potential barriers to achieving a 4% return rate
A credit rating of B- by Standard & Poor's falls into the non-investment grade category, indicating significant default risk for investors, but still possessing some level of security. Despite the less-than-ideal initial rating for Compound Treasury, it marks the first cryptocurrency cash management product to receive a credit rating, aiding institutional clients in better understanding the opportunities and risks in cryptocurrency cash management.
"Compound Treasury is predictable, liquid, compliant, transparent, and rated," said Reid Cuming, General Manager of Compound Treasury.
Improving the Rating
To attract more institutional investors and improve the rating, Standard & Poor's suggests several conditions to enhance the rating:
- Clarity in the regulatory framework for the crypto industry
- Complete and independent audit processes for USDC minting and individual reserve management
- Circle USDC issuer becoming a fully regulated banking institution
- Compound establishing longer stablecoin performance tracking records and improving its capital position
Related
- $20 Million Backing for Web3 Startup! Movement Labs Teams Up with Gate to Drive Cross-Chain Compatibility
- Ripple upgrades XRPL in collaboration with Futureverse, investing tens of millions of dollars in Japan and South Korea.
- Vitalik Not So Fond of DeFi? Developers Question Contradictory Attitude, Vitalik Reveals DeFi Preferences