Moody’s Investors Service has assigned Ripple‘s RLUSD stablecoin a long-term credit rating of A2 and a short-term rating of P-1, marking a significant milestone for digital assets as this represents the first time a native payment token has received an investment-grade assessment from one of the Big Three ratings agencies.
Highest liquidity score awarded
The P-1 short-term rating is Moody’s highest possible score for liquidity. By awarding this rating, Moody’s has placed RLUSD’s ability to meet short-term obligations on par with that of stable commercial banks, establishing a new standard for the digital fiat currency sector.
The agency’s decision follows an in-depth analysis of the stablecoin’s collateral management and operational practices, which are fully situated within U.S. regulatory boundaries.
Collateral and security features
Moody’s highlighted several key factors underpinning RLUSD’s ratings:
- Reserve assets are consistently overcollateralized, with a target of 103% coverage.
- The backing portfolio comprises only fiat U.S. dollars and short-term U.S. Treasury bonds.
- Bank of New York Mellon (BNY Mellon), a leading global custodian, manages the reserves independently.
- Cash held at other commercial banks is capped at $50 million, and these funds are secured with government bonds kept in a segregated BNY account.
- Standard Custody & Trust Company, a Ripple subsidiary, is legally obligated to convert RLUSD tokens into fiat at par value for approved institutional clients within two business days.
Mini dictionary: Bank of New York Mellon (BNY Mellon) is a global investments company and the world’s largest custodian bank, responsible for safeguarding trillions of dollars in assets for major institutional clients.
| Feature | RLUSD |
|---|---|
| Long-term credit rating | A2 |
| Short-term liquidity rating | P-1 |
| Reserve collateralization | 103% |
| Main custodian | BNY Mellon |
| Cash limit per commercial bank | $50 million |
| Collateral types | US dollars, short-term US Treasury bonds |
Recent regulatory approval
Two days prior, Ripple secured final approval from the U.S. Office of the Comptroller of the Currency (OCC) for the launch of Ripple National Trust Bank, expanding its operational capacity. The newly-licensed institution will assume the role of trustee, further safeguarding RLUSD’s reserves and closing key loop-holes in its security structure.
Mini dictionary: The Office of the Comptroller of the Currency (OCC) is a U.S. federal agency that regulates and supervises national banks and federal savings associations, ensuring that they operate safely and comply with banking laws.
Legal vulnerabilities and rating outlook
Moody’s analysts have maintained a pragmatic stance regarding RLUSD’s long-term prospects. While the A2 rating places RLUSD among upper-medium grade investment assets, its outlook remains capped by certain legal concerns.
The primary risk relates to bankruptcy protection. RLUSD’s issuer is not bankruptcy-remote from the parent company, Ripple. This means holders of RLUSD lack direct claims to the underlying assets at BNY Mellon if Ripple were to experience financial distress. In the event of a court-ordered freeze on the issuer’s operations, the stablecoin’s redemption mechanism would be suspended. Overcoming this legal vulnerability is identified as the essential step for any potential rating upgrades in the future.
Moody’s research emphasized that “eliminating the legal vulnerability stemming from the issuer’s exposure to parent group bankruptcy risk” is the decisive condition for raising RLUSD’s investment grade beyond the current level.
