Monday saw decentralized finance protocol Compound Treasury announce that it has been given a credit rating B- by S&P Global Ratings. According to Compound’s team, this is the first time that a major credit agency has given a rating to an institutionalized DeFi protocol. S&P Global Ratings ranges from A (extremely strong), to D (in default) on its investment suitability scale. A score of B indicates that the issuer is capable of meeting financial commitments. However, it can still be affected by economic, business and financial conditions.
S&P Global specifically cites Compound’s rating as a result of the uncertain regulatory regime stablecoins like USD Coin (USDC), stablecoin to fiat conversion risks and the Treasury’s limited capital base, along with a 4.00% return obligation. The rating agency claims that Compound’s track record of zero losses in USDC partially mitigates risks associated with the offering.
Compound Treasury’s general manger Reid Cuming said that the rating by S&P helps institutional clients better understand the risks and opportunities of crypto-powered cash management. Compound Treasury’s ratings may be updated in future discussions with S&P Global if there is more regulatory clarity regarding digital assets, or a longer track of solid performance.
The Compound Treasury’s yield and the underlying DeFi lending protocol support it. The Compound Treasury and its yield are supported by the underlying DeFi lending Compound protocol. At the time this publication was published, $6.94 billion in digital assets had been injected into the protocol by 301,650 suppliers, while $1.83 billion has been borrowed out to 9,275 borrowers. Although Compound Treasury yields are higher than those of the major U.S. banks in savings, it is still available to Accredited Investors and people with significant net worth or income.