Compound Treasury, a crypto firm that allows institutions to tap into the interest rates available on the Compound protocol, nabbed a B- rating from S&P, making it one of the first offerings in decentralized finance to receive such a score from a major rating agency.
Credit ratings provide investors with insights into the degree to which corporations or governments issuing debt will meet their obligations in a timely fashion. Those ratings range from D all the way up to triple-A.
Compound Treasury said the rating could increase in the future as part of ongoing “discussions” with S&P.
A B score, according to S&P Global’s website, indicates “more vulnerable to adverse business, financial and economic conditions, but has the capacity to meet financial commitments.” Countries with B- credit ratings include the likes of Angola, Belize, and El Salvador.
Still, the rating provides a signal to users “an expectation of limited loan losses on the Compound Treasury platform.”
Compound’s Robert Leshner told The Block that the rating represents “a watershed moment for our industry, and signals that DeFi is an equal peer to traditional financial markets, and ready for institutional capital.”
On the comparison to risky countries, Leshner said: “It’s not apples [to] apples because Compound Treasury is a daily liquidity product, whereas with unstable countries you’re taking extreme duration risk.”
Juicy yields have been one draw of institutional and retail investors alike to the crypto market. However, retail offerings such as Coinbase’s Lend product and BlockFi’s interest accounts have attracted the attention of financial regulators in the US.