S&P Launches Risk Assessment for On-Chain Lending Vaults

S&P Global Ratings has launched a new risk assessment service for on-chain lending vaults, called the Vault Risk Assessment (VRA). Announced on October 4, the VRA evaluates six key factors, including credit risk, liquidity risk, mismatches between asset liquidity and withdrawal conditions, as well as risks related to the vault's management, blockchain protocol, security, and governance.

The VRA provides a relative assessment of potential losses for investors in lending vaults, helping them compare risks across different vaults for investment and risk management purposes. The ratings use a system where 'AAA(v)' represents the lowest risk level. However, S&P emphasized that the VRA is not a credit rating nor does it assess returns.

The company noted that while on-chain transactions offer transparency through transaction histories, there is a lack of standardized disclosure regarding vault operations and risks. The VRA aims to provide independent analysis to support institutional investors' participation in the vault market. S&P plans to release initial evaluations of individual vaults in the near future.