Although a significant milestone in decentralized finance, the “Big Three” credit rating agency gave a junk grade to B-. Compound Treasury was given a B credit rating by S&P Global Ratings today. This makes the decentralized lending protocol the first ever to be rated in a major credit rating agency.
Compound allows crypto loan borrowers to take out loans and crypto asset lenders to lock crypto assets in protocols for a fluctuating return of interest.
Compound as a whole boasts more than $5 billion in total value locked across all protocols . However, Standard & Poor’s only rated Compound Treasury today as a lower-risk protocol that accepts cash and USDC. This stablecoin is tied to the U.S. Dollar. Compound Treasury is only available to accredited institutions. The cash is converted to USDC and sent to the Compound Protocol for a guaranteed return at 4% .
S&P deemed Compound Treasury’s outlook stable because all its assets are tied to the US dollar. However, it noted that Compound Treasury only had 20 customers and $180 million in invested capital as of April.
S&P awarded a rating B- to , six levels below BBB+, , the lowest “investment-grade” rating and well within the “speculative-grade” category, often referred to as “junk.”
Yet, the rating is still a significant acknowledgement by a pillar in traditional finance of DeFi’s potential staying power. A blog entry by Reid Cuming, Compound Treasury General Manager, stated that the Treasury is currently in discussions with S&P regarding a possible rating upgrade.
Robert Leshner, founder of Compound, wrote this morning in a tweet that traditional financial markets will eventually converge. This is a significant milestone in the convergence.
This rating follows a weekend in which major cryptocurrency including Ethereum and Bitcoin fell to half of their peak. It is yet to be determined when major rating agencies will allow cryptocurrency to be untethered from traditional assets.