- According to Bluechip, Tether received an overall rating of “D.”
- Garett Jones, the Chief Economist at Bluechip, emphasized that the quality of their governance greatly influences the stability scores of many stablecoins..
On July 22, Bluechip, an independent, not-for-profit stablecoin rating agency, revealed its plan to release its updated rating lists in August. Economist John Paul Koning praised this development and regarded it as a positive development. He noted that New York stablecoins, namely GUSD, BUSD, and Paxos received the highest ratings, which he deemed appropriate.
This is a step forward. Stablecoin credit ratings were introduced via @bluechip_orgwith the New York stablecoins (GUSD, BUSD, Paxos) getting the best ratings, and rightly so, while offshore coins like Tether and TrueUSD get the worst ratings. pic.twitter.com/LfZTlEVFKg
— John Paul King (@jp_king) July 22, 2023
Moreover, Koning mentioned that “offshore stablecoins” like Tether and TrueUSD received the lowest ratings, suggesting they were rated negatively by the agency. US House Committee on Financial Services Chairman Patrick McHenry also took to Twitter to share the stablecoin rating list.
According to Bluechip, Tether received an overall grade of ‘D.’ The label “high risk” was attributed to the insufficient decentralization. This was due to governance concerns, particularly with regard to reserve verification and repayment transparency, which contributed to this rating. In addition, Tether’s gold standard stablecoin XAUT also received a ‘D’ rating.
Bluechip suggested that Tether could improve its rating to a “C” by disclosing the names of its banks and custodians. In addition, conducting a comprehensive financial audit by an independent auditor or including clear and transparent repayment terms in the Terms of Service can contribute to a rating upgrade.
Garett Jones, the Chief Economist at Bluechip, stressed that the quality of their governance greatly influences the stability ratings of many stablecoins. He noted, “Stacks of wealth invite predators of wealth both inside and outside the organization,” emphasizing the importance of good governance.
Many of our Bluechip stablecoin reviews revolve around the quality of governance:
Piles of wealth invite predators of wealth both inside and outside the organization.
So we had to influence not only monetary economics, but also organizational economics @bluechip_org stablecoin reviews.
— Garett Jones (Bluechip launch 7/13, 12pm ET) (@GarettJones) July 23, 2023
On the other hand, Paolo Ardoino, the CTO of Tether, expressed his displeasure with the rating by tweeting a meme on July 23.
— Paolo Ardoino 🍐 (@paoloardoino) July 22, 2023
Binance USD (BUSD) Surprisingly Gets ‘A’ Rating Despite SEC Lawsuit
Surprisingly, despite the SECs lawsuit against publisher Paxos as part of the crackdown on crypto, Binance USD (BUSD) received an ‘A’ rating from Bluechip. Similarly, fully regulated Gemini USD (GUSD) and Liquity USD (LUSD), which often deviate from their peg, were both rated ‘A’. Despite being the target of a lawsuit from the SEC, Gemini USD still received a high valuation.
In addition, the agency gave Circle’s USD coin (USDC) has a ‘B+’ rating. Despite being fully centralized, which led to some point deductions, Bluechip deemed it ‘low risk’ due to its managerial properties.
DAI, the world’s third largest stablecoin, earned points for its decentralization and achieved a ‘B+’ rating. Tron’s USDD was the only stablecoin to receive an ‘F’ rating, indicating that it is at the bottom of the rankings.
The asset was flagged for its lack of stability and governance. The rating agency also assigned another spotlight stablecoin, TrueUSD (TUSD), a ‘D’ grade.
Bluechip’s mission for stablecoins
Recently launched, Bluechip is a non-profit organization dedicated to assessing the safety of stablecoins. It aims to provide unbiased reviews of leading stablecoins, making it accessible for individuals of all technical backgrounds to understand the relative safety of these cryptocurrencies.
Bluechip’s stablecoin ratings are based on the SMIDGE rating framework developed by the three founders. SMIDGE stands for Stability, Management, Implementation, Decentralization, Governance and Externals and includes key factors considered in the evaluation process.
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