S&P Global on August 7 issued a new report, for the first time including the DeFi protocol Sky Protocol in its credit rating scope, with a rating of "B-".
The report noted that while Sky Protocol can still fulfill its financial obligations, its capacity to withstand market or economic environment deterioration is limited. Nonetheless, this rating reflects a systematic review of DeFi risks under the traditional financial framework and signals the crypto market's move towards a more rigorous compliance era.
S&P's Key Review: Centralized Governance and Weak Capital
S&P Global directly pointed out that Sky Protocol's biggest concern is centralized governance. Founder Rune Christensen holds about 9% of governance tokens, and the community's voting participation rate is low, resulting in Rune Christensen having high substantive control, making it far from the truly decentralized goal. The report stated:
"The decentralization of the Sky Protocol is limited, with high governance centralization. If key personnel's attitude changes or encounters accidents, the protocol will face significant uncertainty."
Meanwhile, in terms of capital, the protocol's Risk-Adjusted Capital Ratio was only 0.4% as of July 27, far below the traditional banking threshold of over 5%, leaving very limited buffer space in case of sudden situations.
Liquidity Test: Single Large Depositor and Stablecoin Pegging Challenge
The report's second focus was on liquidity. Sky Protocol's main stablecoin USDS (Sky Dollar) has a market value of about $7.7 billion, ranking third. S&P gave USDS's liquidity mechanism a score of 4 (1 strong, 5 weak), indicating high stabilization pressure. The key reason is that Sky Protocol does not promise to redeem USDS with US dollars, only allowing minting with digital assets, which could potentially cause de-pegging during severe market volatility.
Additionally, with entities like Ethena having deposited around $1.5 billion, if depositors urgently withdraw funds, a bank run risk could emerge.
Regulatory Gray Areas and Synchronized Technical Risks
Third, S&P also included regulation and technology in its rating model for Sky Protocol. S&P Global believes that DeFi protocols and DAOs still occupy a legal gray area, and the latest US stablecoin bill favors regulated, centralized issuers with no clear regulations for DeFi. Sky Protocol has invested about 35% of its assets in US Treasury bonds and USDC, attempting to strengthen its stable image, but this also tightens its connection with traditional finance. If regulations tighten, the project may face pressures from licensing, personnel, and compliance costs.
On the technical side, S&P Global considers smart contract vulnerabilities and oracle manipulation risks unavoidable. Although Sky Protocol has completed multiple audits and launched a bug bounty program, S&P still considers this a "structural" risk. The report indicates that future hacking methods will continuously evolve, and the project's firewall needs to be continuously upgraded.
Rating Outlook: Breaking Centralization and Improving Capital for Upward Adjustment
S&P Global set Sky Protocol's short-term outlook as "stable", meaning the rating is unlikely to be significantly adjusted in the next year. To improve the rating, the report suggests: Sky Protocol needs to further decentralize governance power, increase community voting participation, maintain a risk-adjusted capital ratio above 5% long-term, significantly reduce depositor concentration, and establish more flexible liquidity support. Conversely, if governance centralization increases or asset quality deteriorates, the rating could be further downgraded.
In summary, traditional rating agencies' involvement symbolizes the DeFi ecosystem moving towards standardization. In the future, for projects to achieve higher scores, transparency and risk management processes will become necessary conditions, forcing developers to continue striving towards the "decentralization" goal and maintaining stable project operations.
