S&P Global Ratings has issued its first credit rating for a decentralized finance protocol, assigning Sky Protocol a B-minus with a stable outlook.
The rating, published August 8, applies to the protocol’s stablecoin liabilities, including USDS and DAI, as well as their interest-bearing versions, but does not extend to governance tokens. The move establishes a precedent for applying traditional credit evaluation frameworks to on-chain entities.
S&P cited several constraints behind the speculative-grade rating. Depositor concentration was a central factor, with a small number of participants controlling a large share of assets.
Governance centralization was also flagged, with founder Rune Christensen holding roughly 9% of governance tokens amid low voter participation. The protocol’s risk-adjusted capital ratio of just under 0.5% was noted as low relative to traditional credit standards, alongside concerns over regulatory and cyber risks.
Per Ainvest, S&P equated Sky Protocol’s credit profile to that of the Republic of Congo’s sovereign debt, placing it firmly in speculative territory. The agency’s stable outlook reflects an expectation that current risk factors will persist over the next 12 months, with upgrades contingent on improvements in governance decentralization, capital adequacy, and depositor diversity.
The assessment also recognized operational strengths. Sky has operated with minimal credit losses since 2020, maintains diversified liquidity reserves that include fiat-backed stablecoins and tokenized funds, and has undergone external smart contract audits. These mitigants, while supporting the rating, were outweighed by concentration and structural risks.
S&P’s entry into protocol-level ratings follows its prior evaluations of stablecoins, where it assigned “strong” to USDC and “constrained” to USDT in earlier assessments.
The move extends that framework to the broader liabilities of a DeFi protocol, enabling certain institutional counterparties such as prime brokers, insurers, and structured product arrangers to reference a standardized measure of credit risk.
Such ratings could now influence how DeFi yields are priced. A defined credit risk profile enables the repricing of lending and liquidity provisions in line with traditional credit markets, rather than solely on supply-demand dynamics within protocols.
The introduction of recognized credit benchmarks also creates a pathway for DeFi exposure to meet mandates from regulated entities that require minimum rating thresholds.
Sky Protocol’s rating is unlikely to change in the near term, according to S&P’s published methodology, though future governance and capital reforms could alter that trajectory.
The agency’s analysis adds a formalized risk lens to DeFi operations, providing a common reference point for both on-chain participants and traditional financial institutions seeking to engage with the sector.
