Although the protocol promises a potentially attractive annual yield of 4%, it is now only available to authorized investors.
Compound Treasury, a decentralized finance (DeFi) technology, acquired a B- credit rating from S&P Global Ratings on Monday. According to the Compound team, this is the first time a major credit agency has given an institutionalized DeFi system a rating. The investing appropriateness scale at S&P Global Ratings goes from AAA (very strong) to D. (in default). A B- rating suggests that the issuer can satisfy its financial obligations, despite continuing vulnerabilities to commercial, financial, and economic situations.
S&P Global bases its conclusion on the unpredictability of the regulatory system for stablecoins like USD Coin (USDC), stablecoin-to-fiat convertibility concerns, and the Treasury’s “restricted capital base” with a 4.00 percent per year return commitment. However, the rating agency claims that the Compound protocol’s track record of zero losses in USDC helps to limit the offering’s risks.
“S&P’s rating helps our institutional clients more readily appreciate the possibilities and hazards of crypto-powered cash management,” Compound Treasury’s general manager Reid Cuming said of the development. Compound Treasury’s ratings might be improved as part of continuing conversations with S&P Global if there is more regulatory certainty for digital assets or a longer track record of outstanding performance.
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The underlying DeFi lending Compound protocol supports the Compound Treasury and its yield. At the time of publishing, 301,650 providers had contributed $6.94 billion in digital assets to the protocol, while 9,275 borrowers had borrowed $1.83 billion. While the yield from Compound Treasury is higher than that of major US banks, it is only available to Accredited Investors or individuals with sufficient income and net worth.