Moody’s Proposes Stablecoin Ratings Tied To Reserve Quality

• Moody’s plans to rate stablecoins based on reserve-asset quality rather than issuer structure.
• Framework applies advanced rates and market risk tests to different stablecoin reserves.
• Only stablecoins with legally segregated reserves would qualify for Moody’s ratings.

Moody’s on Friday proposed a formal system to rate stablecoins as they move deeper into traditional finance markets worldwide. The plan, released December 12, sets out how the agency would assess reserve assets, risks, and safeguards. Moody’s said the proposal responds to growing stablecoin use by financial institutions, especially across the United States.

How Moody’s Plans to Rate Stablecoin Reserves

At the center of the proposal is a reserve-first assessment model built on traditional credit analysis. Moody’s said it would assign ratings to stablecoin obligations rather than to issuers. Notably, the agency would first review each eligible asset backing a stablecoin.

This first step focuses on credit quality. Moody’s plans to use existing ratings of reserve assets and associated counterparties. As a result, two dollar-pegged stablecoins could receive different ratings despite both claiming full backing.

However, reserve composition alone would not determine outcomes. Moody’s said it would assess assets individually based on type and structure. This approach treats stablecoins similarly to other rated financial obligations.

Moody’s also outlined a second step addressing market value risk. The agency said it would estimate price sensitivity for each reserve asset. Asset type and maturity would drive those calculations. Based on this review, Moody’s would apply advance rates to reserve values. 

These rates show potential losses during stress periods. Consequently, lower-risk assets would support higher adequate backing levels. Beyond reserves, the framework includes broader operational reviews. Moody’s said it would examine liquidity risk, technology risk, and operational controls. 

These factors would influence final ratings. Notably, Moody’s framed the proposal as global in scope. The agency said its cross-sector rating method would apply internationally. However, strict conditions would govern which stablecoins qualify.

Segregation Rules and Alignment With U.S. Law

A core requirement in Moody’s proposal involves asset segregation. The agency said reserve assets must remain legally separated from issuer operations. This separation must hold even during issuer bankruptcy.

Moody’s defined these holdings as “reserve assets.” According to the proposal, issuers cannot use these assets for other business activities. Instead, they must solely satisfy stablecoin obligations.

This requirement aligns closely with recent U.S. legislation. The GENIUS Act established a federal framework for payment stablecoins. It mandates highly liquid reserves, including insured bank deposits and U.S. Treasury bills.

Notably, Moody’s referenced these standards when describing its methodology. The agency said adequate segregation supports confidence in redemption claims. It also reduces legal uncertainty during financial stress. The timing of the proposal reflects regulatory momentum. 

Several U.S. regulators have recently clarified expectations around stablecoin reserves. As a result, Moody’s framework mirrors emerging compliance standards. Furthermore, Moody’s said it would rate only stablecoins that meet these segregation conditions. 

Issuers failing to isolate reserves would not qualify. This filter narrows the scope of eligible tokens. The proposal now enters a public review phase. Moody’s invited market participants to submit feedback. The comment period remains open until January 26, 2026.

Related: OCC Grants Conditional Approval for Five Crypto Trust Banks

Tether, Transparency, and Market Scrutiny

The proposal arrives as reserve transparency remains a focal issue. Tether, issuer of USDT, has previously faced scrutiny over disclosure practices. However, the company has taken steps to address market concerns. In October, Tether reported total exposure of $135 billion to U.S. Treasuries. 

This disclosure followed increased regulatory attention. Tether has also stated plans to launch a U.S.-focused stablecoin. Moody’s did not single out any issuer in its proposal. However, the framework places greater emphasis on reserve quality and disclosure. 

As a result, issuers with more transparent reporting may fare differently under ratings. Notably, Moody’s said differentiated ratings would reflect actual reserve risk. Equal pegs would not guarantee equal outcomes. This distinction marks a shift from headline backing claims.

Market participants have yet to respond formally. Analysts noted the proposal could influence institutional selection criteria. However, Moody’s limited its comments to methodology details. The agency described the framework as a reference tool. It aims to align stablecoin analysis with traditional finance standards. Public feedback will shape the final structure.

Meanwhile, Moody’s proposal sets out a reserve-based rating system tied to asset quality, risk, and segregation. The framework aligns with U.S. stablecoin rules and addresses transparency concerns. The agency will review market comments before moving toward potential stablecoin ratings.