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Moody's Developing a Scoring System for Stablecoins

Moody’s Developing a Scoring System for Stablecoins

(30 January 2023 – Global) Moody's is working on a scoring system for up to 20 stablecoins, as the asset class faces rising scrutiny from regulators and investors, according to Bloomberg.

The system will offer an analysis of the coins based on the quality of attestations on the reserves backing them, says Bloomberg, citing a source. However, it will not represent an official credit rating.

Stablecoins are designed to be less volatile than the likes of Bitcoin because they are pegged to another asset, usually the US dollar. To ensure this, issuers generally hold reserves of the asset in at least an equivalent amount.

However, questions have been raised about whether this actually happens. Tether, which has $67 billion of dollar-pegged stablecoins in circulation, was fined by US authorities in 2021 for lying about its reserves, notes Bloomberg.

Banks and traditional financial institutions have become more interested in stablecoins as a means for tapping into distributed ledger technology. Some chose to develop their own tokens, such as JPMorgan’s JPM Coin for internal payments which launched in 2019.

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