Stablecoin Stability Assessments

Stablecoins are virtual assets that are designed to maintain a stable value relative to certain assets (e.g. fiat currencies), while leveraging the benefits of blockchain technology.


Throughout history, the quality of and intrinsic value of currency – its “gold content” – determine the fate of coins, markets, and economies. In the digital age with an evolving landscape of cryptocurrency, a robust stablecoin “gold content” assessment is crucial to market development and effective regulation. Our assessment framework aims to equip investors, sponsors, and regulators with critical insights regarding the quality of reserve assets and the risks of losing peg to a fiat currency or a basket of currencies.


With Stablecoin Stability Assessments, quality reigns supreme.

Our assessment framework begins with an asset assessment considering 2 major factors:

    • Quality of reserve assets (e.g. credit risk, market risk, custody risk, currency risk)

    • Overcollateralization and liquidation mechanism


    5 additional adjustments are then applied to derive the final stability assessment score:

      • Legal and regulatory framework

      • Management competence and governance

      • Redeemability and liquidity

      • Technical reliability

      • Track record


      The assessment is not a credit rating or investment recommendation but a relative ranking. We assign stability scores on a scale from 1 to 5.


      Illustration of Stablecoin Stability Assessments

      Assessment
      		Definition
      1 (very strong)A stablecoin has a very strong ability to maintain its peg to a fiat currency or a basket of currencies
      2 (strong)A stablecoin has a strong ability to maintain its peg to a fiat currency or a basket of currencies
      3 (adequate)A stablecoin has a adequate ability to maintain its peg to a fiat currency or a basket of currencies
      4 (constrained)A stablecoin has a constrained ability to maintain its peg to a fiat currency or a basket of currencies
      5 (weak)A stablecoin has a weak ability to maintain its peg to a fiat currency or a basket of currencies


      The service could be provided on either a public or private basis. It can be also provided on a point-in-time basis or with ongoing surveillance.

       

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      For more information or to discuss your specific needs, please contact us at commercial@cspi-ratings.com.

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