tl;dr
S&P Global Ratings has assigned its first credit rating to a decentralized finance protocol, giving Sky Protocol a B-minus with a stable outlook. The rating covers stablecoin liabilities but excludes governance tokens. Key concerns include depositor concentration, governance centralization, low capi...
S&P Global Ratings has issued its inaugural credit rating for a decentralized finance (DeFi) protocol, assigning Sky Protocol a B-minus rating with a stable outlook. This rating, published on August 8, covers the protocol’s stablecoin liabilities including USDS and DAI, as well as their interest-bearing variants; however, it does not apply to governance tokens. This milestone sets a precedent for applying conventional credit evaluation methodologies to on-chain entities.
The speculative-grade rating reflects several constraints highlighted by S&P. Key concerns include depositor concentration, where a small number of participants hold a disproportionately large share of assets. Additionally, governance centralization was an issue, with founder Rune Christensen controlling approximately 9% of governance tokens amid low voter turnout. The protocol’s risk-adjusted capital ratio, slightly below 0.5%, ranks low against traditional credit standards. Regulatory and cyber risks further weighed on the assessment. Comparatively, S&P likened Sky Protocol’s credit profile to that of the Republic of Congo’s sovereign debt, firmly placing it in speculative territory.
The stable outlook indicates S&P’s anticipation that these risk factors will remain consistent over the next year, with potential rating upgrades contingent upon improvements in governance decentralization, capital adequacy, and depositor diversification. Operational strengths of Sky Protocol were also noted, including minimal credit losses since 2020, diversified liquidity reserves comprising fiat-backed stablecoins and tokenized funds, and the completion of external smart contract audits. While these factors offer support, they were insufficient to overcome the identified concentration and structural risks.
This protocol-level rating initiative follows S&P’s earlier work assessing stablecoins, where USDC was rated as “strong” and USDT as “constrained.” Extending this framework to the broader liabilities of a DeFi protocol allows institutional players such as prime brokers, insurers, and structured product arrangers to reference a standardized measure of credit risk. The establishment of a defined credit risk profile can influence how DeFi yields are priced by aligning lending and liquidity provisioning with traditional credit market principles rather than purely protocol-specific supply-demand dynamics.
Moreover, recognized credit benchmarks pave the way for DeFi exposure to comply with regulatory mandates requiring minimum credit ratings. While Sky Protocol’s rating is unlikely to shift in the short term based on S&P’s published methodology, future reforms in governance and capital structure could prompt changes. Overall, S&P’s analysis injects a formalized risk perspective into DeFi operations, fostering a common reference point for both on-chain participants and traditional financial institutions engaging with this rapidly evolving sector.