Bloomberg reported on January 26 that major financial institution Moody’s Corporation is reportedly working on a scoring system for 20 stable coins, assessing the quality of their repository verification.
The scoring system is still in its early stages and will not represent an official credit rating, Bloomberg reported, citing a person familiar with the matter.
Stable coins are one of the most popular asset classes within the crypto industry. Typically, the value of a digital asset is tied to a national fiat currency such as the US dollar or another financial instrument such as gold. As its name suggests, stablecoins are expected to be less volatile than other types of cryptocurrencies.
As of press time Moody’s did not respond to BenCrypto’s request for comment.
The need for a stablecoin for quality storage and regulation
Following the collapse of Terra’s algorithmic stablecoin TerraUSD in 2022, stablecoin issuers have come under renewed attention from financial regulators on the quality of their reserves.
An International Monetary Fund research paper highlighted the importance of high-quality and liquid stablecoin reserves. According to the report, stablecoins with quality reserves have the potential to become a stable source of value. These assets have the potential to “become a reliable, widely accepted means of exchange”.
Furthermore, financial regulators in the United States have highlighted the dangers of an unregulated stablecoin. Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corporation (FDIC), suggested that stablecoin issuers should be subject to stricter regulatory measures.
Gruenberg’s view was corroborated by the IMF, which stated that “stablecoin issuers should be subject to stricter prudential requirements.”
Meanwhile, Tether USDT, the largest stablecoin in the industry, has faced increasing pressure from the community and regulators over its opaque reserves. In 2021, the stablecoin issuer settled with the New York Attorney General’s Office for misrepresenting its endorsement. The firm also saw a mini bank run out due to the collapse of Terra, with withdrawals of around $10 billion.
Despite the increased scrutiny of the asset class, its adoption rate has increased worldwide. BeinCrypto reports that Tether will process $18.2 trillion in transactions in 2022, ahead of traditional payment processors such as Visa and Mastercard. Several media reports have also revealed how citizens in struggling economies rely on assets for their savings and transactions.
BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.