Moody's has assigned Sky Protocol a B3 long-term counterparty risk rating with a stable outlook, marking the credit rating agency's first evaluation of a stablecoin protocol. Sky, the decentralized autonomous organization formerly known as MakerDAO, oversees the dollar-pegged stablecoins USDS and DAI.
The rating reflects a significant milestone: traditional Wall Street credit assessment machinery has now formally engaged with decentralized finance. However, Moody's report identifies substantial structural concerns alongside some strengths.
Capital Position Emerges as Key Challenge
As of September, Sky held approximately $90 million in tangible common equity against roughly $10 billion in tangible managed assets—a ratio Moody's characterized as a material credit weakness. The agency noted that Sky's governance objectives call for tangible common equity to reach $150 million over the medium term.
If losses overwhelm available capital, the protocol would attempt to mint and sell new governance tokens as a backstop. Should that mechanism fail, USDS and DAI could face write-downs.
Positive Factors in the Assessment
Moody's credited Sky with low historical credit losses, liquid assets, and solid profitability relative to its risk profile. Since 2020, the protocol has recorded approximately $15 million in cumulative losses. Roughly 45% to 50% of its assets consist of stablecoins and tokenized money market funds, while approximately 25% sit in cryptocurrency-backed loans.
Structural Risks Cited
The rating reflects concerns beyond capitalization. Moody's noted that Sky's confidence-sensitive stablecoin liabilities, DAO structure, and decentralized governance create elevated operational, legal, and regulatory risks. The agency also highlighted that Sky lacks audited financial statements, formal incorporation, employees, officers, and directors.
Path to Rating Improvement
Moody's indicated that an upgrade becomes possible if Sky's capital ratio rises above 2.5% and remains there while profitability, liquidity, and asset risk stay at current levels. Conversely, a capital ratio drop below 0.5%, consecutive quarterly losses, or weakened liquidity could result in a downgrade.
