Compound Treasury receives B- credit rating from S&P Global Ratings

On Monday, decentralized finance protocol Compound Treasury (DeFi) announced that it had received a credit rating of B- from S&P Global Ratings. As the team at Compound shared, this is the first time a major lending agency has issued a rating for an institutionalized DeFi protocol. The investment suitability scale of S&P Global Ratings ranges from AAA (extremely strong) to D (in default). A score of B- indicates that the issuer can meet its financial obligations, although vulnerabilities regarding business, financial and economic conditions remain.

Referring specifically to Compound’s rating, S&P Global credits the uncertain regulatory regime for stablecoins such as USD Coin (USDC), the convertibility risks of stablecoins to fiat and the Treasury Department’s “limited capital base” along with a 4.00% per annum return requirement for the decision. However, the rating agency says the compound protocol’s record of zero losses, measured in USDC, partially mitigates the risks of the bid.

Regarding the development, Reid Cuming, General Manager of Compound Treasury, commented, “S&P’s rating helps our institutional clients better understand the opportunities and risks of crypto-based cash management.” As part of ongoing discussions with S&P Global, the ratings could by Compound Treasury in the event of greater regulatory clarity for digital assets or a longer track record of solid performance.

The Compound Treasury and its return are powered by the underlying DeFi lending Compound protocol. At the time of publication, 301,650 suppliers have contributed $6.94 billion worth of digital assets to the protocol, while 9,275 borrowers have borrowed $1.83 billion. While Compound Treasury’s rate of return exceeds the savings rates of major US banks, it is only accessible to accredited investors or those who meet significant income and net worth thresholds.