- According to Bluechip, Tether was assigned an overall rating of ‘D.’
- Garett Jones, the Chief Economist at Bluechip, emphasized that the quality of their governance heavily influences the stability ratings of many stablecoins.
On July 22, Bluechip, an independent nonprofit stablecoin rating agency, revealed its plan to release its updated rating lists in August. Economist John Paul Koning praised this development, considering it a positive advancement. He remarked 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 have debuted via @bluechip_org, with the New York stablecoins (GUSD, BUSD, Paxos) getting the best ratings, and rightfully so, while offshore coins like Tether and TrueUSD have been slapped with the worst ratings. pic.twitter.com/LfZTlEVFKg
— John Paul Koning (@jp_koning) July 22, 2023
Additionally, Koning mentioned that “offshore stablecoins” like Tether and TrueUSD received the lowest ratings, suggesting they were negatively assessed by the agency. The U.S. House Committee on Financial Services Chairman, Patrick McHenry, also took to Twitter to share the stablecoin ratings list.
According to Bluechip, Tether was assigned an overall rating of ‘D.’ The label “high risk” was attributed to its insufficient decentralization. This was because of governance concerns, specifically related to reserve verification and redemption transparency, contributed to this rating. Furthermore, 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. Additionally, conducting a comprehensive financial audit by an independent auditor or incorporating clear and transparent redemption timelines in its Terms of Service could contribute to an upgrade in its rating.
Garett Jones, the Chief Economist at Bluechip, emphasized that the quality of their governance heavily influences the stability ratings of many stablecoins. He commented, “Piles of wealth invite predators of wealth, whether inside or outside the organization,” highlighting the importance of sound governance.
A lot of our Bluechip stablecoin ratings turn on quality of governance:
Piles of wealth invite predators of wealth, whether inside or outside the org.
So we needed to bring not just monetary econ but also organizational econ to bear on the @bluechip_org stablecoin ratings.
— Garett Jones (Bluechip Launch 7/13, Noon ET) (@GarettJones) July 23, 2023
On the other hand, Paolo Ardoino, Tether’s CTO, showed his dissatisfaction with the rating by tweeting a meme on July 23.
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— Paolo Ardoino 🍐 (@paoloardoino) July 22, 2023
Binance USD (BUSD) Surprisingly Receives ‘A’ Rating Despite SEC Lawsuit
Surprisingly, despite the SEC’s lawsuit against issuer Paxos as part of its 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 its peg, both obtained an ‘A’ rating. Despite being targeted by the SEC with a lawsuit, Gemini USD was still rated highly.
Additionally, the agency gave Circle’s USD Coin (USDC) a ‘B+’ rating. Despite being fully centralized, which led to some points deduction, Bluechip considered it as ‘low risk’ due to its governance properties.
DAI, the world’s third-largest stablecoin, earned points for its decentralization and secured a ‘B+’ rating. Tron’s USDD was the sole stablecoin to receive an ‘F’ rating, signifying its position at the bottom of the rankings.
The asset was flagged for its lack of stability and governance. The rating agency also assigned another stablecoin in the spotlight, TrueUSD (TUSD), a ‘D’ grade.
Bluechip’s Mission for Stablecoins
Recently launched, Bluechip is a nonprofit organization committed to assessing the safety of stablecoins. It aims to offer impartial ratings of leading stablecoins, making it accessible for individuals of all technical backgrounds to comprehend the relative safety of these cryptocurrencies.
Bluechip’s stablecoin ratings are based on the SMIDGE rating framework developed by its three founders. SMIDGE stands for Stability, Management, Implementation, Decentralization, Governance, and Externals, encompassing key factors considered in the evaluation process.