How DeFi lender Sky plans to bump up its B- credit rating and entice institutions

Sky will repackage its products, minimise exposure to risky sources of yield, and launch a new capital vault in a bid to shore up its credit rating for prospective institutional investors.

In August, S&P Global Ratings gave the decentralised finance lender a B- credit rating, putting the protocol’s USDS and DAI stablecoins on par with government bonds from the Democratic Republic of the Congo.

As Sky looks to attract more institutions, it’s aiming to improve that rating.

“We’ve reached this dominant position within the current market. We need to grow into TradFi,” Sam MacPherson, CEO of Phoenix Labs, a core contributor to Sky, told DL News in an interview at EthCC in Cannes.

“We’re very focused on improving the weak points that the more traditional institutional players are looking at,” he said.

Capital from the traditional finance world is pouring into DeFi as blockchain technology becomes more accepted and adopted among the world’s biggest financial institutions.

DeFi protocols want to attract these new investors, and a good way to do so is by securing a strong score from a respected rating agency.

A credit rating indicates to investors the likelihood that a debt issuer will default on a loan or other debt instrument due to bankruptcy. They are vital for traditional financial firms because they help them manage risk in financial markets.

High-yield bonds, often called junk bonds, refer to any debt security rated lower than BBB- by S&P Global Ratings or Fitch.

Junior senior  

The first thing Sky plans to do is repackage the debt that backs its USDS stablecoin.

Sky’s users can mint USDS by depositing crypto assets such as Ethereum and stablecoins into Sky Vaults, which use those deposits to earn yield. Users can then exchange USDS for sUSDS, a yield-bearing version of the token. Users cannot mint more USDS than the value of their collateral, meaning that loans are overcollateralised.

“There will be USDS, and there may be some degree of exposure to higher yield products, but it’s going to be packaged up in a way that the ratings agencies are going to be comfortable with the exposure,” MacPherson said.

At the same time, the protocol plans to section off riskier, higher yield assets in a junior risk capital vault, likely in the second quarter of the year.

“This will be a first loss type of vault. There’s higher risk but also the return will be higher,” MacPherson said.

These kinds of structured financial products are common in traditional financial markets.

When borrowers repay debt, lenders holding so-called senior products get paid first, but usually at a lower return. This makes the products lower risk and popular with conservative investors.

Junior products, on the other hand, are riskier because they get paid last, but offer higher yields to compensate for potential losses.

Additionally, Sky has minimised its exposure to USDe, a synthetic dollar issued by fellow DeFi protocol Ethena, MacPherson said.

S&P Global Ratings previously assigned USDe a 1,250% risk weighting in its previous assessment of Sky due to the complex mechanism used to maintain the asset’s value.

Ratings rush

Sky isn’t the only crypto project to pay for a credit rating.

In 2022, Compound Prime, the institutional arm of DeFi lender Compound Finance, also received a B- rating for its senior unsecured debt from S&P Global Ratings.

In addition to traditional ratings agencies like S&P Global Ratings, Moody’s Ratings, and Fitch Ratings, several crypto native ratings agencies are also popping up.

Platforms like Credora offer credit analytics and risk assessment for DeFi lending, although the ratings they provide don’t yet hold the same weight among investors as the traditional agencies.

As of March 2026, Spark, a Sky subDAO, has received a B+ rating for its stUSDS Vault, equivalent to a BB- from traditional ratings agencies.

“It’s super important,” for DeFi protocols to receive these ratings, MacPherson said.

“There is a lot of suspect underwriting going on right now and there really needs to be this check on major vault lending markets,” he said.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at [email protected].