Casey Wagner

<div id="highlights-block_627976653708e" class="highlights">
 <ul>
 <li>The DeFi protocol is the first to receive a credit rating from S&amp;P Global Ratings</li>
 <li>Low capital base, increasing regulatory scrutiny and return obligations were areas of concern for credit raters</li>
 </ul>
 
</div>



The first institutional DeFi company rated by S&amp;P Global received a B-, or junk, grade.



S&amp;P Global Ratings has assigned Compound Prime a B- long-term credit rating. It is the first time an institutional DeFi (decentralized finance) offering has been rated by the agency,&nbsp;



Compound Prime, a Compound Labs subsidiary, has a stable outlook, but ratings issuers cited uncertain regulatory conditions around stablecoins and Compound Treasury’s currently “very low” capital base — as well as its 4% return obligation — as concerns.



Compound Prime oversees Compound Treasury, the company’s security offering that converts US dollars to stablecoin USDC and secures accredited investors a 4% return, according to Reid Cuming, Compound Treasury’s general manager.&nbsp;



The Treasury offering was first announced in June 2021.&nbsp;



A B- rating, a junk rating six levels below investment grade, means the business is more vulnerable to adverse financial conditions, although it “currently has capacity to meet financial obligations,” S&amp;P Global Ratings said in its <a href="https://www.spglobal.com/ratings/_division-assets/pdfs/guide_to_credit_rating_essentials_digital.pdf?utm_medium=cpc&amp;utm_source=google&amp;utm_campaign=Brand_S" target="_blank" rel="noreferrer noopener">explanation</a>.



“As part of ongoing discussions with S&amp;P, Compound Treasury’s ratings could be upgraded in upside scenarios such as greater regulatory clarity for the digital asset industry, or a longer track record of stable performance,” Cuming said in a <a href="https://medium.com/compound-finance/compound-treasury-sp-credit-rating-897aff3a6f8c" target="_blank" rel="noreferrer noopener">statement</a>.



S&amp;P choosing to assign a DeFi protocol a rating, which Compound said is a first, shows that greater adoption is coming, Cuming said.&nbsp;



“Over time, traditional financial markets and DeFi will converge,” Robert Leshner, Compound’s founder, <a href="https://twitter.com/rleshner/status/1523671242922147840?s=20&amp;t=53W-DwecPjQVgf7gkS7Fug" target="_blank" rel="noreferrer noopener">tweeted</a>. “Compound Treasury is one of the products accelerating this transition, by offering institutions a cash-management product powered by the Compound protocol.”



Ratings will become more common, Lesher added, which will help to foster institutional demand.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.

compound prime