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DeFi protocol credit rating: S&P Global assigns ‘B-’ to Sky Protocol in historic first

S&P Global has issued its first-ever DeFi protocol credit rating, giving Sky Protocol a ‘B-’ due to governance centralization, weak capitalization, and regulatory uncertainty

by Davidson Okechukwu
5 days ago
in Crypto News
Reading Time: 3 mins read
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DeFi Protocol Credit Rating Shock

DeFi Protocol Credit Rating Shock

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S&P Global has assigned a ‘B-’ DeFi protocol credit rating to Sky Protocol — formerly Maker Protocol — marking the first time a major credit agency has formally evaluated a decentralized finance platform. The move signals a new era of scrutiny for DeFi and stablecoin issuers, blending traditional credit analysis with blockchain-specific risk assessments.

In its detailed report, S&P Global cited governance centralization, weak capitalization, and regulatory uncertainty as the primary reasons for the rating.

The assessment marks a milestone in bridging traditional credit evaluation methods with blockchain-based financial systems.

Why this DeFi protocol credit rating matter?

The DeFi protocol credit rating assigned to Sky — formerly Maker Protocol — is part of S&P’s broader review of stablecoin issuers, initiated in late 2023.

This initiative evaluates the ability of stablecoins to maintain their peg to fiat currencies.

Sky’s USDS stablecoin, ranked fourth-largest by market capitalization at around $5.36 billion according to CoinMarketCap, received a “4” stability score, labeled “constrained,” on S&P’s 1-to-5 scale, where 1 is “very strong” and 5 is “weak.”

Andrew O’Neil, S&P Global’s digital assets analytical lead, told cointelegraph

“A ‘B-’ rating means that we believe the protocol currently can meet its financial obligations, but it would be vulnerable in adverse business, financial, and economic conditions.”

Governance and capitalization under the spotlight

S&P’s DeFi protocol credit rating report flagged multiple vulnerabilities:

  • High depositor concentration

  • Centralized governance, with co-founder Rune Christensen controlling almost 9% of governance tokens

  • Low voter participation in key decisions

  • Limited surplus reserves, with a risk-adjusted capital ratio of just 0.4% as of July 27

  • Regulatory uncertainty surrounding DeFi operations

While the protocol has maintained minimal credit losses and consistent earnings since 2020, these strengths were not enough to offset the risks identified.

Sky’s assets Source: S&P Global Ratings
Sky’s assets Source: S&P Global Ratings

The Sky Ecosystem Asset-Liability Committee highlighted that the rating process allowed them to address both traditional and DeFi-specific risks.

In their statement, they noted:

“We revisited analytical assumptions from TradFi that don’t necessarily apply on-chain and examined DeFi-native risks — including smart-contract, oracle, bridge, and governance vulnerabilities — that must be monitored closely.”

This emphasis on DeFi-native risk factors is a crucial evolution in how DeFi protocol credit ratings will likely be assessed going forward.

The bigger picture: Stablecoin issuers under scrutiny

S&P’s stablecoin review already includes major names such as Circle’s USDC, which received a rating of 2 (strong), and Tether’s USDT, ranked 4 (constrained).

According to O’Neil:

“Tether’s weaknesses are more around transparency, whereas USDS has a more complex asset base compared to USDC. The relatively weak capital position also drives its ranking.”

This points to a broader trend of increased oversight and transparency demands in the stablecoin and DeFi ecosystem.

The DeFi protocol credit rating for Sky comes as blockchain platforms increasingly intersect with traditional financial markets.

S&P’s move follows its earlier decision to award an “AAA” rating to Figure Technology Solutions’ blockchain-based mortgage securitization worth $355 million — a sign that blockchain-based financial products are being formally integrated into global credit evaluation systems.

By blending traditional credit metrics with blockchain-specific risk assessments, S&P Global is setting the stage for a new hybrid financial framework where DeFi protocols may be held to the same standards as banks and corporations.

Conclusion: The road ahead for DeFi credit rating

Sky Protocol’s DeFi protocol credit rating is a double-edged sword — a historic first that legitimizes DeFi in the eyes of traditional finance, but also a warning about its current vulnerabilities.

With governance centralization, thin capitalization, and evolving regulatory frameworks at play, DeFi platforms seeking higher ratings will need to adopt stronger capital buffers, decentralize governance further, and improve operational transparency.

Whether other protocols follow Sky into the credit rating spotlight will depend on the sector’s willingness to embrace more traditional risk management practices while retaining the core principles of decentralization.

Tags: . crypto newsaltcoinsbitcoin regulationblockchain platformCryptocurrenciesDecentralizationDeFi protocol credit ratingMakerDaoS&Ptradfi
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Davidson Okechukwu

Davidson Okechukwu

Davidson Okechukwu is a passionate crypto journalist/writer and Web3 enthusiast, focusing on blockchain innovation, deFI, NFT ecosystems, and the societal impact of decentralized systems. His engaging style bridges the gap between technology and everyday understanding with a degree in Computer Science and various professional certifications from prestigious institutions. With over four years of experience in the crypto and DeFi space, Davidson combines his technical knowledge with a keen understanding of market dynamics. In addition to his work in cryptocurrency, he is a dedicated realtor and web management professional.

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