An institutional offering from decentralized financial platform Compound is receiving mixed marks from S&P Global Ratings.
The credit-rating agency gave Compound Treasury (a product of Compound Prime LLC) a B- grade, meaning the USDC-driven yield platform is rated "speculative" but "currently able to meet financial obligations."
"The outlook is stable," S&P said in a statement on Compound Prime.
Despite the poor marks, Compound called the rating its first DeFi rating. It appears to be the first time an "institutional DeFi" product has been rated by one of the major rating agencies.
"This signals a huge step forward in the maturity of the crypto industry as traditional institutions begin to assess the risks of financial offerings based on digital assets," Compound's Reid Cuming wrote in a blog post.
Cuming described the rating to CoinDesk as a "translation mechanism" for institutions looking to dip their toes into DeFi.
"What's really interesting and important about this is that it really demonstrates that DeFi can be measured, weighted and integrated into more traditional financial risk methodologies, in addition to being understood by traditional finance," Cuming said in an interview.
Compound Treasury launched in June 2021 and is designed to appeal to crypto-savvy companies looking for yield on their cash reserves. Accounts throw off 4% APR on stablecoin USDC deposits, are classified as securities and are offered only to accredited institutional clients, according to the product's website.
In its assessment, S&P said Treasury has yet to gain a foothold, "with only 20 clients and $180 million invested at the end of April." By comparison, Compound's primary DeFi lending platform currently has more than $5 billion in total value (TVL) of crypto assets.
S&P wrote, "In our view, the rating's major weaknesses include the company's very small capital base, regulatory risk associated with cryptocurrencies, significant operational risk and complexity, conversion risk between private stable coins and fiat currency, and potential hurdles to achieving a 4% return."