Compound Treasury, a decentralised finance protocol, announced on Monday that it has obtained a credit rating of B-from S&P Global Ratings. According to the Compound team, this is the first time a major credit agency has assigned a rating to an institutionalised DeFi system. The investment suitability scale of S&P Global Ratings ranges from AAA (very strong) to D (in default). A B-rating suggests that the issuer can meet financial obligations while being vulnerable to commercial, financial, and economic conditions.
S&P Global bases its decision on the uncertain regulatory system for stablecoins such as USD Coin (USDC), stablecoin-to-fiat convertibility concerns, the Treasury’s “limited capital base,” and a 4% annual return obligation. However, the rating agency claims that the Compound protocol’s past record of zero losses evaluated in USDC serves to limit the offering’s risks.
Compound Treasury’s general manager, Reid Cuming, remarked on the move, saying, “S&P’s rating helps our institutional customers more readily appreciate the opportunity and risks of crypto-powered cash management.” Compound Treasury’s ratings may be raised as part of continuing conversations with S&P Global if there is better regulatory certainty for digital assets or a longer track record of outstanding performance.
The Compound Treasury and its yield are backed by the DeFi lending Compound protocol. At the time of publishing, 301,650 providers had injected $6.94 billion in digital assets into the system, while 9,275 borrowers had borrowed $1.83 billion. While the return on Compound Treasury is higher than the savings rates of major US banks, it is only available to certified investors or those who meet significant income and net worth thresholds.
