Sky Frontier Foundation announced on October 7 local time that Moody’s Ratings had assigned Sky Protocol a B3 issuer rating with a stable outlook. The foundation said this was the first time Moody’s had rated a stablecoin protocol. B3 is a speculative-grade rating below investment grade and indicates high credit risk.
Sky is an onchain financial protocol that issues the U.S. dollar stablecoin USDS. Independent capital allocators receive USDS liquidity and invest it across several strategies within risk limits set by governance, with the resulting returns flowing into protocol revenue.
The foundation said Moody’s viewed the level of ‘Sky Reserves’ as a major rating factor. Sky governance has shifted to a framework that retains part of the protocol’s net income until reserves reach a minimum target, and the foundation said building those reserves will take time. S&P Global Ratings has described the protocol’s surplus reserves as capital available to absorb credit losses that could arise from its assets.
S&P previously assigned Sky Protocol a B- rating with a stable outlook on August 7, 2025. That assessment cited depositor concentration, centralized governance and capital that was insufficient relative to the risk of the assets as key constraints. S&P assessed the creditworthiness of USDS and DAI as well as the savings tokens sUSDS and sDAI, defining a reduction in the redemption amount owed to token holders as a default.
The foundation said it will review the upgrade factors identified by both rating agencies with Sky governance and announce an implementation plan, with investment grade as the long-term goal. It also said that it is an independent organization that does not control the protocol or DAO governance. The announcement did not state when the reserve target would be reached.