Stablecoin Methodology

Webacy’s stablecoin methodology assesses the probability of financial loss arising from a stablecoin’s backing, liquidity, market exposure, operations, concentration, and governance. A stable market price alone does not establish safety. A stablecoin may maintain its peg while weaknesses develop in its reserves, redemption arrangements, technical infrastructure, or counterparties. Our framework evaluates these sources of risk together to understand the conditions that could lead to loss.

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Assessment framework

The rating framework comprises six risk types. Each contains risk categories, which are assessed using underlying rating factors: specific evidence, conditions, and indicators relevant to that category.

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Credit risk

Credit risk assesses whether the assets and counterparties supporting a stablecoin can meet its financial obligations.

• Backing and coverage: The quality and sufficiency of assets supporting outstanding stablecoin obligations.
• Credit and counterparties: Exposure to the failure or deterioration of issuers, custodians, and other financial counterparties.
• Events and incidents: Credit-related events and their implications for the stablecoin’s financial resilience.
• Collateral and liquidation: The ability of collateral arrangements and liquidation mechanisms to protect backing when conditions deteriorate.

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Liquidity risk

Liquidity risk assesses whether holders can redeem or exit their exposure without material loss.

• Redemption and exit: The availability and reliability of redemption routes and market liquidity, including how they may perform under stress.

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Market risk

Market risk assesses how changes in prices and market conditions could affect the stablecoin or its backing.

• Valuation and oracles: The reliability of valuations and price information used by the stablecoin’s mechanisms.
• Events and incidents: Market disruptions and their implications for stability.
• Bridges and representations: Market risks associated with bridged or wrapped versions, including differences in pricing and convertibility.

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Concentration risk

Concentration risk assesses dependence on a limited set of exposures or participants.

• Concentration: The extent to which backing, holdings, liquidity, or dependencies are concentrated, and how that concentration could amplify a disruption.

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Operational risk

Operational risk assesses whether the stablecoin’s infrastructure and processes can function reliably.

• Code and chain: Risks arising from smart contracts and the blockchain infrastructure supporting the stablecoin.
• Bridges and representations: The operational reliability of mechanisms used to transfer or represent the stablecoin across chains.
• Events and incidents: Operational failures, security incidents, and their implications for continued operation.
• Backing and coverage: The reliability of processes used to maintain, account for, and report backing and coverage.

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Governance risk

Governance risk assesses how authority, decision-making, and holder protections affect exposure to loss.

• Admin controls and governance: Who can change the system, exercise privileged powers, or make decisions that affect holders.
• Events and incidents: Governance-related events and their implications for accountability and control.
• Claim and loss allocation: The nature of holders’ claims and how losses are allocated if the stablecoin or its supporting arrangements fail.

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How the assessment evolves

Webacy combines on-chain and off-chain evidence. On-chain risk is assessed in real time. Off-chain risk is assessed as close to real time as available information allows, depending on the publication and verification of disclosures, reports, and other evidence. Underlying rating factors inform category assessments, which contribute to the six risk types and the overall rating. Categories that appear under multiple risk types are examined from the perspective of each type. For example, backing and coverage has both a financial dimension and an operational dimension. Supporting records are informational. They provide context and evidence for the assessment and are separate from the six risk types that contribute to the rating.