Moody’s Ratings assigned Sky Protocol a B3 long-term counterparty risk rating with a stable outlook, giving institutional allocators a second major-agency credit assessment of the protocol behind USDS and $DAI while flagging its thin capital cushion.
The Oct. 6 action rates Sky Protocol on Moody’s global scale. B3 falls in the speculative-grade category, which Moody’s describes as subject to high credit risk for its B ratings. The assessment adds a credit opinion, not a guarantee against losses.
Moody’s cited approximately $90 million of tangible common equity against $10 billion of tangible managed assets as of September 2026. That works out to about 0.9%, according to The Defiant’s calculation—a measure of capital available to absorb losses, not the percentage of stablecoins backed by assets.
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The agency credited Sky with low historical credit losses, solid profitability and a material share of relatively liquid assets. But it called capitalization a “material credit weakness” and identified operational, governance, legal and regulatory risks as constraints on the rating.
Sky Frontier Foundation said Sky is the first stablecoin protocol rated by both Moody’s and S&P Global Ratings, and that S&P had recently reaffirmed its B- grade. Sky separately reported a “stable outlook” following S&P’s annual review.
The concerns echo S&P’s initial assessment in August 2025. As The Defiant reported, that B- issuer credit rating highlighted weak risk-adjusted capitalization, concentrated depositors and centralized governance. Moody’s latest assessment likewise flags concentrated voting power and the absence of audited financial statements, while recognizing publicly verifiable onchain data as an alternative source of information.
What the Rating Means for Stablecoin Holders
The new grade is a counterparty risk rating of the protocol, not a separate instrument rating for USDS or sUSDS, the savings token through which users access Sky’s governance-set savings rate.
Moody’s said that if losses exceed available capital, Sky must mint and attempt to sell governance tokens. If those loss-absorption mechanisms prove insufficient, USDS and $DAI would be written down.
Liquidity also remains conditional: holders can swap USDS and $DAI one-for-one into $USDC only while the relevant peg stability module has $USDC available. Neither token is directly redeemable for fiat currency, Moody’s said.
Capital Sets the Upgrade Test
Moody’s said a capital-based upgrade could follow if tangible common equity rises above 2.5% of tangible managed assets and is expected to stay there, while profitability, liquidity and asset risk remain at current levels. Substantial additional safeguards against operational, governance, legal and regulatory risks offer another possible upgrade path.
The agency cited a $150 million medium-term capital target. Sky’s financial dashboard shows how reserves are being built: while below the 150 million USDS floor, the revenue-allocation rules direct 20% of net revenue to security and maintenance, then retain half the remainder for reserves.