#DeFiGetsGraded

TradFi Ratings for DeFi

The 'stable' outlook of the rating indicates that S&P does not foresee changes in the next 12 months, as long as Sky maintains sufficient liquidity reserves and prudent management. However, the agency established clear scenarios that could lead to a rating revision:

A downgrade could occur if the available liquidity falls sustainably below 20% of total assets, if loan losses exceed capital reserves, or if regulations emerge that harm its business model.

Conversely, an upgrade, although very unlikely in the short term, will depend on a successful evolution towards a truly decentralized governance model (with the 'Endgame'), the adoption of a dynamic capital reserve system that keeps the risk-adjusted capital ratio above 5%, and the implementation of mechanisms to prevent depositor concentration.

This is one of the first times that the rigorous standards of one of the leading rating agencies in the world are applied to a DeFi protocol, marking an approach towards standardized risk analysis applied to the decentralized finance sector. Although the rating is speculative and shows a rigorous scrutiny of its capabilities, the analysis provides a layer of legitimacy to one of the leading platforms in the sector.