Moody’s Announces Long-Term and Short-Term Ratings for Ripple (XRP)! Both Praise and Warning!

Moody’s, one of the leading credit rating agencies, assigned Ripple’s dollar-pegged stablecoin $RLUSD an A2 rating for long-term deposits and a P-1 rating for short-term deposits. This decision provides an important reference point for institutional investors in assessing stablecoin risks, with reserve structure and potential default scenarios also being considered.

$RLUSD’s Reserve Structure Supports the Note!

According to The Defiant, the notes cover $RLUSD, which is issued directly on the XRP Ledger and Ethereum networks by Ripple’s subsidiary Standard Custody & Trust Company. Moody’s viewed positively the fact that the reserves consist mainly of highly liquid assets such as short-term US Treasury bonds and cash.

Furthermore, $RLUSD’s target of a 103% reserve coverage ratio was also considered in the rating and was evaluated positively. A large portion of the reserves are held under BNY’s custody services. Moody’s also highlighted practices such as daily reserve verification, independent monthly accounting confirmations, and the burning of tokens prior to redemption.

What Do A2 and P-1 Grades Mean?

Moody’s long-term A2 rating indicates upper-to-medium credit quality, while P-1 represents the agency’s highest short-term rating level. These assessments offer institutional users an additional risk assessment in terms of $RLUSD’s repayment capacity and the quality of its reserves.

However, Moody’s added that although the reserves are kept separate from the issuer’s equity assets, this structure does not fully protect $RLUSD from the effects of the issuer’s bankruptcy. Moody’s also warned that since $RLUSD holders do not have direct ownership rights over the reserves, repayments could be delayed in the event of the issuer’s default. Keeping the reserves separate does not completely eliminate this risk.

*This is not investment advice.