S&P Rates DeFi Stablecoin Protocol at B Equivalent to Congo's Sovereign Debt

S&P Global Ratings has made history by assigning a credit rating to a decentralized finance (DeFi) stablecoin protocol for the first time. Sky Protocol, which operates the USDS and DAI stablecoins, has received a 'B-' rating—equivalent to the Republic of Congo’s sovereign debt level [1]. This milestone, announced on August 8, 2025, reflects S&P’s recognition of the increasing relevance of DeFi protocols within the global financial system [2].

The 'B-' rating is the first of its kind for any stablecoin issuer and underscores both the potential and the risks associated with DeFi governance models. S&P highlighted concerns over Sky Protocol’s centralized governance structure, where co-founder Rune Christensen holds 9% of governance tokens. This concentration of control is exacerbated by the generally low voter turnout among token holders, raising questions about the protocol’s true decentralization [3].

Liquidity risks were another key factor in the rating decision. S&P noted that the protocol faces challenges due to the concentration of large depositors. A sudden withdrawal of funds could destabilize the system, particularly if not adequately supported by reserve mechanisms [3]. Additionally, the agency emphasized that the risk-adjusted capital ratio of 0.4% and the underdeveloped static surplus reserve mechanism further contribute to the credit risk profile.

The report also pointed to potential threats from smart contract vulnerabilities and regulatory uncertainties in the DeFi space. S&P warned that over the next 12 months, events such as liquidity crunches, significant losses in crypto loans, or a more stringent regulatory environment could lead to a downgrade [3].

Despite these concerns, S&P expressed cautious optimism about Sky Protocol’s long-term prospects. The agency noted that the protocol has maintained stable operations since 2020 and has demonstrated resilience during periods of market volatility [3]. Continued improvements in governance decentralization, capital adequacy, and deposit diversification could lead to a stronger credit rating in the future.

The assignment of a 'B-' rating to a DeFi protocol is a significant development that signals S&P’s acknowledgment of the role DeFi plays in the broader financial landscape. While the rating does not immediately trigger large inflows of capital, it marks a step toward greater institutional awareness and acceptance of DeFi assets. This move may encourage more formal evaluation frameworks and greater scrutiny of other stablecoins and DeFi platforms [1].

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[1] DeFi protocol Sky is as investible as Congolese debt, S&P ... (https://www.dlnews.com/articles/defi/defi-protocol-sky-is-as-investible-as-congolese-debt-sp-global-ratings-says/)

[2] S&P Global Assigns First Credit Rating to DeFi Protocol (https://www.bitget.com/news/detail/12560604903153)

[3] Standard & Poor's has assigned Sky Protocol a 'B-' credit ... (https://www.theblockbeats.info/en/flash/306431)