S&P Introduces System for Evaluating Stablecoins

S&P, renowned for its extensive experience in bond and credit ratings, has recently unveiled a novel system aimed at evaluating stablecoins, which play a pivotal role in the cryptocurrency landscape by facilitating a connection between digital assets and traditional financial systems. Serving as substitutes for conventional currencies like the U.S. dollar or euro, stablecoins are tethered to a fiat currency, with USDT pegged to $1 and others linked to 1 euro, among various denominations. They offer investors an alternative to fiat currencies when cashing out of crypto investments and are also utilized as a means of digital payment.

The newly introduced Stablecoin Stability Assessment by the ratings agency assesses stablecoins on a scale of 1 to 5, with the objective of gauging their capability to maintain a stable value relative to a fiat currency, as outlined by S&P. A rating of 1 indicates a "very strong" stability, whereas a rating of 5 signifies "weak" stability.

Tether's USDT, the most widely adopted stablecoin, received a score of 4, indicating it is "constrained." In contrast, Circle Internet Financial's USDC, the second-largest stablecoin boasting a market cap of $24 billion, secured a rating of 2, denoting "strong" stability – the highest rating conferred to any stablecoin. This commendable assessment is shared with Gemini dollar (GUSD) and Pax Dollar (USDP).