Moody’s proposes credit rating framework for stablecoins

Moody’s, a leading global agency widely recognized as one of the “big three” credit rating agencies (alongside S&P and Fitch) has announced its proposal to adopt a new approach to evaluating stablecoins. The credit rating agency adopted this suggestion as digital assets became increasingly integrated into traditional finance.

In a statement released on Friday, December 12, Moody’s announced its intention to assess the creditworthiness of stablecoin obligations carefully. Afterwards, the agency vowed to assign ratings accordingly.

To effectively carry out this plan, Moody’s noted that they will first examine each kind of asset in the reserves that supports a stablecoin. Secondly, the credit rating agency will evaluate the quality of these assets in accordance with their ratings and those of connected parties.

Moody’s proposes a new way to rate stablecoins specifically 

Moody’s new framework suggests that two tokens linked to the US dollar, which claim to be backed 1:1, could be subjected to different ratings depending on the type of assets used to back them.

Sources noted that the credit rating agency has released this suggestion at a time when several financial institutions are preparing themselves to begin embracing or boost their use of stablecoins, especially in the United States. 

Following this situation, Moody’s elaborated that “The second part of our proposed analysis would focus on market value risks by evaluating the risk associated with each reserve asset based on its type and how long until it matures.”

To expand on this statement, sources familiar with the matter highlighted that this analysis will result in the existence of advance rates that apply to each kind of asset’s value. Moreover, they acknowledged that the agency’s proposal recommends considering a stablecoin’s operational risk, liquidity risk, technology risk, and other factors when determining its rating.

As this proposal was shared with the public for feedback, reports mentioned that Tether, a financial technology company that issues the world’s largest stablecoin has received backlash in the past concerning its transparency regarding the reserves supporting its stablecoin.

To address this criticism, the fintech company took crucial steps aimed at reassuring the market. The crypto firm also made it clear that it intends to launch a stablecoin targeted at the US market soon.

Meanwhile, reports dated October noted that Tether announced it has a total of approximately $135 billion invested in US Treasuries. Regarding the Guiding and Establishing National Innovation for US Stablecoins (GENIUS Act) that was recently approved, reliable sources stated that the bill establishes the first comprehensive federal regulatory framework for payment stablecoins in the United States. These sources mentioned that the bill encourages issuers to maintain highly liquid reserves to back their stablecoins.

On the other hand, analysts argued that such reserves should cover safe assets, such as deposits at insured banks and US Treasury bills. 

Moody’s proposal raises heated debates among individuals 

Following Moody’s proposal, reports this week highlighted that the credit rating agency presented a strategic plan outlining how it would evaluate stablecoins. 

In this detailed plan, Moody’s stated that its “cross-sector rating methodology” would be the suitable method to apply globally to stablecoins, particularly where practices of issuing and managing this cryptocurrency are kept separate from other activities.

The agency referred to these separated assets as reserve assets. According to them, effective segregation means these reserve assets can only be utilised in meeting obligations linked to the stablecoin. This applies even if the issuer or its affiliates go bankrupt.

Notably, Moody’s reportedly created room for comments from market participants on its suggested system. The deadline for feedback is scheduled for January 26, 2026.

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