Moody warns of stablecoin adoption risk

In its latest report, Moody’s Investors Service has warned that the recent instability in the traditional banking sector could have a negative impact on the adoption of stablecoins. The credit rating agency has highlighted the risks that fiat-backed stablecoins like USDC face, stating that the reliance of stablecoin issuers on a small set of off-chain financial institutions limits their stability. The depegging of USDC on March 10, which was caused by the sudden collapse of Silicon Valley Bank, has highlighted this risk.

Circle Internet Financial, the issuer of USDC, had $3.3 billion in assets tied up in the bank, and over the span of three days, the company cleared roughly $3 billion in USDC redemptions as the value of its stablecoin plunged to a low of around $0.87. However, USDC quickly regained its peg after the Federal Deposit Insurance Corporation announced that it would backstop all deposits held at Silicon Valley Bank.

Moody’s analysts believe that regulators are likely to pursue more stringent oversight of the stablecoin sector moving forward, given the recent market volatility and the potential risks associated with stablecoins. The credit rating agency has also warned that if USDC had not regained its peg, it could have suffered from a run and been forced to liquidate its assets. Such a scenario could have caused more runs on banks holding Circle’s assets, which could have led to the depegging of other stablecoins.

Despite the collapse of Terra, which led to calls for the regulation of stablecoins, Moody’s believes that fiat-backed stablecoins like USDC operate differently from algorithmic tokens and are less likely to fail. Nevertheless, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions to improve their stability.

In conclusion, the recent instability in the traditional banking sector and the depegging of USDC have highlighted the potential risks associated with stablecoins. While Moody’s believes that fiat-backed stablecoins are less likely to fail than algorithmic tokens, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions. With regulators likely to pursue more stringent oversight of the stablecoin sector moving forward, stablecoin adoption could be negatively impacted.


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Moody’s Getting into Crypto Space, Wants to Hire Cryptocurrency Analyst

Moody’s Investors Service Limited, one of the world’s largest credit-rating firms, is seeking to hire a cryptocurrency analyst, according to the recent job posting.

As for the job ads, the major credit rating company based in New York placed a new opening on LinkedIn’s employment listings. The positing signals that Moody’s is taking a more serious look at digital assets such as cryptocurrency, non-fungible tokens, and DeFi assets.

The job listing indicates that Moody’s Blockchain C4E team is seeking to hire an experienced crypto analyst to develop the company’s digital currency, NFTs, and DeFi strategies and leverage the research and development the team has put together. 

“You will be part of a team of individuals responsible for supporting successful project deliveries for our C4E. The role also includes advocating for operational and process changes to move towards a more data-driven organizational paradigm,” the Moody’s job listing notes.

Moody’s job posting indicates that an understanding of DeFi is a very vital part of the job. The company is looking for someone with “[Managing and maintaining] deep understanding of the financial markets and the potential wide-reaching impact of decentralized finance (DeFi) on [an] existing ecosystem. [Alongside performing] back-testing of assessment framework(s) developed by Blockchain C4E using market data to analyze crypto-assets and other related products; provide detailed feedback for further refinement of risk factors.”

The employment listing shows that Moody’s is also interested in stablecoins, CBDCs, and NFTs. The company wants the analyst to develop in-depth knowledge on DeFi and blockchain-based elements like stablecoins, non-fungible token (NFT) assets, and central bank digital currencies (CBDCs).  

Moody’s expects the crypto analyst to stay up-to-date on development within the industry and carry out a risk analysis of DeFi (blockchain) protocols and other features. Of course, the company wants a person who is very passionate about blockchain and DeFi.

Companies on Crypto Hiring Spree

Based on its current commitment to hiring a cryptocurrency expert, Moody’s, therefore, joins a rising number of major companies exploring the viability of digital currencies such as Bitcoin, NFTs, and DeFi.

Moody’s recruitment efforts come after similar job postings listed by major corporations like Amazon, JPMorgan, British billionaire Simon Nixon’s family office, among others.

On July 25, Amazon Inc. announced that it would hire a blockchain and digital expert to join its payment team. The corporation stated that an experienced digital currency and blockchain product lead would help the firm develop its digital currency and blockchain strategy and product roadmap. Amazon took such a decision because of what it termed as being “inspired by the innovation taking place in the crypto sector” and therefore needs to examine what it could look like within the company.

Last month, Walmart multinational retail giant announced its intention to hire a leader for cryptocurrency and digital products. According to the job posting, Walmart wanted to employ talent with experience in product or project management and technology commercialization and an in-depth understanding of cryptocurrency and related technologies.

In addition, late last month, Seek Capital family office, owned by UK Billionaire Simon Nixon, announced plans to hire a cryptocurrency analyst to help the firm expand its investment products into the crypto sector.

Image source: Shutterstock


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Japan’s Digitalization Effort will have Mixed Credit Impact across Sectors, says Moody’s Report

Japan’s digitalization effort will have mixed credit impact across sectors according to a new report by Moody’s investor services.

Japan’s Digitalization Effort will have Mixed Credit Impact across Sectors, says Moody’s Report

Under Prime Minister Yoshihide Suga, Japan’s (A1 stable) government is aiming to promote digital transformation (DX) through the newly formed Digital Agency.

The Digital Agency will lead efforts to digitalize Japanese government operations, and to increase the efficiency of public services. To differing degrees, the initiative will shape the credit quality of not only the central, and regional and local governments (RLGs), but also Japan’s businesses and financial institutions, and structured finance instruments.

The aim of the government-led initiative is to generate efficiencies in Japan as it is falling behind others in digital adoption and readiness. Businesses that support digitalization could stand to gain, but the rise of new competitors could threaten existing players.

Japan’s new initiative to digitalize government operations and the delivery of public services will bolster policy effectiveness, supporting sovereign credit quality, but will bring mixed credit implications for regional and local governments (RLGs), businesses and financial institutions, according to a new report by Moody’s Japan K.K.

Motoki Yanase, a Moody’s Vice President and Senior Credit Officer:

“Digital transformation will lower operating costs by increasing operational efficiency and dismantling silos between ministries. It could also spur digitalization in the private sector – which if achieved will support economic growth.”

But remote working could bring mixed credit implications to RLGs, some of which could face pressure on their revenues. For instance, fare revenues at RLG-operated mass transit systems will come under pressure as more workers work from home, while property tax revenues could fall as fewer offices are leased out. On the other hand, some local governments could enjoy more tax revenue from companies that open exurban satellite offices.

Meanwhile, businesses that support the digitalization effort, such as startups and companies providing IT infrastructure, stand to benefit from rising demand, but office property and office equipment companies could lose out as remote working takes hold. And financial institutions will benefit from more streamlined operations, although the near-term cost of investing in technology and cyber-risk prevention will be high.

Finally, for the structured finance sector, digital adoption will optimize the origination process, support volumes in an aging society with a shrinking working-age population and strengthen the credit screening process through the use of artificial intelligence. On the flip side, greater digitalization could create cybersecurity risks such as fraud and identity theft.

Image source: Shutterstock


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