UpdatesJan 27, 2023

Moody's takes a look at cryptocurrencies! The agency will develop a scoring for stablecoins

A well-known American rating agency has become interested in digital currencies.

Moody's rating agency is developing a scoring system for stablecoins. According to information obtained by Bloomberg, this system is to include the analysis of 20 digital assets.

Moody's is developing a scoring for stablecoins

Citing sources wishing to remain anonymous, Bloomberg indicates that Moody's, a rating agency that provides credit ratings for listed companies, is in the early stages of developing a scoring system that assesses the quality of stablecoin reserve credentials.

However, there are many indications that this system will not be considered an official credit rating. Nevertheless, such an assessment will certainly have a positive impact on investors' confidence in this group of virtual assets.

Stablecoin is a type of cryptocurrency whose value is pegged to a fiat currency, such as the US dollar or euro, or another financial instrument, such as gold or silver. This means that stablecoins reflect the quotations of underlying instruments in the virtual world, while legally and taxally remaining cryptocurrencies.

Therefore, considering that in some jurisdictions exchanging one cryptocurrency for another does not result in a tax liability, stablecoins have gained immense popularity, as they allow investors to defer tax liability until the actual profits are realized, i.e. exchanging cryptocurrencies for fiat currencies such as the dollar or euro.

The biggest problem with stablecoins, however, is the issue of their coverage in the underlying instrument. Given that they reflect, for example, the US dollar exchange rate, the issuer of a stablecoin should have USD reserves reflecting the number of issued stablecoins.

For example, Tether, the largest issuer of stablecoins, reached a settlement with the New York Attorney General's Office in 2021 after allegedly misrepresenting the amount of fiat collateral backing its USDT stablecoin. In addition to paying $18.5 million in damages to New York State, the company was required to report periodically on its reserves.

The topic of fiat reserves has recently returned after the collapse of cryptocurrency companies in 2022, including the Terra ecosystem and its stablecoin UST and one of the top cryptocurrency exchanges FTX.