thenewscrypto.com
- Moody’s is a credit rating agency that publishes evaluations of credit risk.
- Stablecoin reserves have come under increased scrutiny in recent months.
Bloomberg claimed on January 26 citing anonymous sources that Moody’s was working on a scoring system for stablecoins. That would include assessments for up to 20 digital assets.
Moody’s is a credit rating agency that publishes evaluations of credit risk. In the form of ratings for publicly listed firms. The agency posted a report on Coinbase on January 19. Detailing the cryptocurrency exchange’s reduced senior debt and corporate family rating.
Stablecoins are a subset of cryptocurrencies whose value is linked to that of a stable asset, such as the U.S. dollar. In other words, stablecoins are digital currencies whose value is pegged. To that of a preexisting asset, such as a government bond, as a hedge against the price fluctuations of other cryptocurrencies. But this doesn’t mean stablecoins are totally safe to use.
Stablecoin Reserves Under Increased Scrutiny
Although it won’t be treated as an official credit rating. The system, which is still in the works, will assess and rank the veracity of stablecoin reserve attestations. In most cases, independent auditors verify the truthfulness of a company’s statements. And confirm that stablecoins are backed one to one by their reserves.
As a direct result of the bear market and the bankruptcy of crypto companies in 2022, stablecoin reserves have come under increased scrutiny in recent months. The Terra ecosystem collapsed in May when the TerraUSD (UST) algorithmic stablecoin lost its dollar peg and crashed.
For instance, in 2021, the state of New York and the biggest stablecoin issuer, Tether, reached a settlement on allegations that Tether had exaggerated the amount of fiat collateral supporting its USDT stablecoin. It was reported at the time that the corporation was fined $18.5 million by the state of New York and ordered to produce monthly disclosures of its reserves.