Moody's launches stablecoin risk monitoring tool DAM, 609 incidents of large stablecoins becoming unpegged this year

Moody's Analytics, a subsidiary of credit rating agency Moody's, has launched an artificial intelligence Digital Asset Monitor (DAM) to track market volatility and risks. According to its report, so far this year, there have been 609 instances of large fiat-backed stablecoins breaking their peg.

DAM Launches First Version with Risk Monitoring for Stablecoins

DAM's initial release tracks 25 stablecoins, including USDT, USDC, and PayPal Coin, which represent over 92% of the stablecoin market value and are mostly backed by major fiat currencies. DAM plans to gradually add other digital assets to the platform in the future.

Moodys' Senior Director of Product Innovation, Yiannis Giokas, stated:

We have seen the stablecoin market evolve into a billion-dollar asset class, representing about 10% of the cryptocurrency market and most on-chain activities. Without a comprehensive risk assessment tool available, DAM aims to meet the needs of customers.

Moodys' DAM will provide real-time insights and assess on-chain and off-chain risk components using both public and proprietary Moodys data to offer a comprehensive risk assessment for DeFi assets like stablecoins. The evaluation will cover 5 risk categories:

• Issuer Risk: Assessing the stablecoin issuer
• Market Risk: Evaluating intraday volatility compared to fiat alternatives
• Liquidity Risk: Evaluating market depth to ensure investors are not trapped in illiquid environments
• Custodian Risk: Assessing the quality of custodians holding reserves on behalf of stablecoin issuers
• Reserve Risk: Evaluating reserve quality based on volatility and risk assessment.

DAM Shows Increase in Large Stablecoin Depegging Events in 2023

DAM defines Depegging as when a stablecoin's price fluctuates more than 3% relative to a fiat currency's exchange rate within a day. According to their data, as of mid-September this year, there have been a total of 1,914 depegging events, with the top five stablecoins by market cap including DAI on the Ethereum blockchain accounting for 609 depegging instances. In comparison, in 2022, there were a total of 2,847 depegging events, with 707 of them involving large stablecoins.

DAM Expected to Introduce New Features such as Tokenized Treasury Bills

The next version of DAM may include the following features:

• Network security indicators from smart contracts and blockchain perspectives
• Market sentiment for fiat-backed stablecoins
• Tokenized Treasury Bills
• Overcollateralized stablecoins

Customers can subscribe for a fee and access DAM tools through the SaaS platform.