Moody’s plans to build a new scoring solution that focuses primarily on stablecoins. That does not include central bank digital currencies (CBDCs), though. Instead, it is a fully crypto-oriented solution.
It would be interesting to see a scoring system for stable digital assets. While Bitcoin, Ethereum, and altcoins are incredibly volatile, stablecoins are a different breed. Their value is pegged to fiat currency, such as the U.S. Dollar, Euro, or Japanese Yen. On paper, these currencies can never deviate from their peg. However, depending on how they are issued, that situation may differ.
In 2022, the UST stablecoin collapsed. While it was tied to the U.S. Dollar, it was issued as a decentralized stablecoin. Moreover, it was backed by cryptocurrency reserves rather than money in a bank account. As those reserves got manipulated in value, the UST stablecoin lost its peg and ultimately reduced to $0. Algorithmic stablecoins pose inherent risks, whereas pegged assets issued through a centralized entity are considered safer.
The new scoring system developed by Moody’s may help alleviate industry concerns. More specifically, it is scheduled to track over a dozen pegged currencies. Several factors will be considered, including liquidity, reserves backing them, etc. Those reserves must be attested to ensure maximum transparency. An issuer like Tether, for instance, has transparent reporting on its collateral for USDT.
The new approach may bring more people into the crypto and stablecoin world. Unlike e-wallets like PayPal, a stablecoin requires a cryptocurrency wallet or exchange account. However, it is easier to use fiat currency in the digital age. However, it remains unclear how one would provide scores and what they would mean exactly. Little is known about Moody’s new system, but we know it will not be an “official” credit rating.
Stablecoin attestations may be provided on a quarterly basis. Opting for a monthly approach is also possible and may instill more trust and confidence. It would be a boon for algorithmic stablecoin issuers, as those often rely on more volatile assets. That may also explain why those stablecoins are less popular. A DAI, MIM, or other asset doesn’t hold a candle to Tether’s USDT market cap.
It is no secret that banks and other institutions have a keen interest in digital pegged currencies. Those assets are the opposite of central bank digital currencies, even if they rely on a centralized issuer. However, getting people excited about banks and governments exerting more control over consumer funds has proven tricky.
The new project by Moody’s sparks cautious excitement. However, as many details remain unclear, no one knows what to expect. There is no official roadmap or release date for the stablecoin scoring system. Moreover, there’s no guarantee it will be a publicly accessible system either.
