Moody’s Corp., one of the world’s leading rating agencies, will start looking at how it can ascertain the risk and health of stablecoins, Bloomberg News reported Jan. 26.

The need to rate stablecoins comes amidst renewed pressure from governments and regulators around the world.

The agency’s scoring system will have an analysis of up to 20 stablecoins, which be based on the quality of attestations on their reserves, the news outlet reported, citing a person familiar with the rating agency’s plans.

Moody’s specializes in providing credit ratings for businesses across various industries. While the company does provide credit ratings for publicly traded crypto companies, it has declined Bloomberg’s request for comment.

Bloomberg reported, citing another source with knowledge of the matter, that Moody’s stablecoin scoring project is still in an early phase, adding that the score would not be equivalent to an official credit rating.

Difference between an algorithmic and collateral stablecoins

An algorithmic stablecoin and a collateral stablecoin are both types of stablecoins, which are cryptocurrencies that are designed to maintain a stable value, usually pegged to a fiat currency like the US dollar.

An algorithmic stablecoin uses a complex set of algorithms and smart contracts to maintain its value. These algorithms are designed to automatically adjust the supply of the stablecoin in response to changes in demand in order to keep its value stable. This is done by adjusting the interest rate paid to holders of the stablecoin or by using other mechanisms like over-collateralization.

A collateral stablecoin, on the other hand, is backed by a reserve of assets, such as fiat currency or gold, which is held as collateral to support the value of the stablecoin. These assets are held in a trust, and the value of the stablecoin is directly tied to the value of the assets held in the trust.

Cryptoslate has reached out to Moody’s but has not received a reply. 

The post Moody’s eyeing a scoring system for stablecoins appeared first on CryptoSlate.