Moody's Ratings has given Sky Protocol a B3 long-term counterparty risk rating with a stable outlook, marking the credit agency's initial evaluation of any stablecoin protocol. Sky, formerly known as MakerDAO, oversees the USDS and DAI dollar-pegged stablecoins. The rating places Sky in the speculative-grade category alongside other lower-rated assets, though the agency highlighted several strengths in the protocol's operations.

Agency Firsts and Cross-Ratings

Sky stands as the sole stablecoin protocol formally rated by both Moody's and S&P Global Ratings. S&P had assigned the protocol a B- grade in August 2025. Moody's described its B3 score as consistent with the earlier assessment from the rival agency.

The B3 designation signals non-investment-grade creditworthiness and reflects elevated risk compared with higher-rated instruments. Nevertheless, the dual ratings provide institutional investors with a consistent framework for evaluating Sky's risk profile through familiar credit methodologies.

Capital Position and Risk Profile

Moody's identified thin capitalization as a central weakness in its evaluation. As of September, Sky held roughly $90 million in tangible common equity against approximately $10 billion in tangible managed assets, equivalent to a capital ratio of about 0.9 percent. The agency described this position as a material credit weakness.

Sky's governance objectives target tangible common equity of $150 million over the medium term. The protocol could address shortfalls by minting and selling new governance tokens, though this would not occur if existing capital suffices. Moody's noted that an upgrade becomes feasible if the capital ratio sustains above 2.5 percent while other metrics remain steady.

A drop below 0.5 percent, consecutive quarterly losses, or reduced liquidity could trigger a downgrade. The rating also accounted for confidence-sensitive stablecoin liabilities, the decentralized autonomous organization structure, and the absence of audited financial statements, formal incorporation, or dedicated staff.

Despite these factors, Moody's credited Sky with low historical credit losses of about $15 million since 2020, liquid assets, and solid profitability relative to risk. Roughly 45 to 50 percent of assets consist of stablecoins and tokenized money market funds, with another 25 percent in cryptocurrency-backed loans.

Institutional Adoption and Reserve Adjustments

Institutional engagement with Sky's USDS stablecoin has continued to build. In late September, Galaxy Digital incorporated $100 million of sUSDS, the savings version, into its corporate treasury, approved the asset for collateral on its lending desk, and acquired SKY governance tokens.

Standard Chartered has projected potential fivefold returns for token holders by 2028, reflecting positive expectations for USDS growth. The banks' actions underscore interest in Sky despite the non-investment-grade rating.

Sky has taken steps to strengthen its reserves. In March, the governing cooperative voted to reduce its daily buyback program by 87 percent and redirect funds to the backstop buffer. The protocol's governance committee has also enhanced financial-management functions and implemented a Stage 2 buyback and reserves framework that retains a portion of net income to build toward a minimum target set by governance.

The protocol's dual-agency ratings and ongoing institutional commitments have helped reinforce its credit profile. Sky's adjustments to governance and reserves remain under review by the agencies, which continue to monitor improvements in capital adequacy and governance concentration for potential future upgrades.