On Monday, the decentralized finance protocol, or DeFi, Compound Treasury announced that it had received a B- credit rating from S&P Global Ratings. As reported by the Compound team, this is the first time a major lending agency has rated an institutionalized DeFi protocol. The scale of investment attractiveness of S&P Global Ratings ranges from AAA (extremely strong) to D (default). A B- score indicates that the issuer is able to meet its financial obligations, although vulnerabilities remain in business, financial and economic conditions.
In regards to the Compound rating, S&P Global cites the uncertain regulatory regime for stablecoins such as USD Coin (USDC), the risks of stablecoin-to-fiat conversions and the Treasury’s “limited capital base”, and a 4.00% p.a. . However, the ratings agency says that the zero loss of the Compound protocol, measured in US dollars, partially mitigate supply risks.
Regarding development, Compound Treasury General Manager Reid Cuming commented: “The S&P rating helps our institutional clients more easily understand the opportunities and risks of managing money using cryptocurrencies.” As part of ongoing negotiations with S&P Global, Compound Treasury's ratings could be upgraded in the event of greater clarity on digital asset regulation or a longer period of stability.
Treasure Compound and its yield are backed by the underlying DeFi Compound lending protocol. As of press time, 301,650 vendors have invested $6.94 billion worth of digital assets in the protocol, while 9,275 borrowers have taken out loans worth $1.83 billion. While savings rates are higher than those of major US banks, Compound Treasury income is only available to accredited investors or those who meet significant income and net worth thresholds.