Chicago-based credit rating company Morningstar is moving into rating blockchain-based assets as it seeks to enhance credibility in the space.
The company has been working on creating cryptocurrency models that offer accurate ways of rating blockchain-based assets. The firm is extending its service of rating investments to include digital assets backed by real assets. This offers a clear way of rating digital assets relative to what has been the standard for crypto rating platforms. For example, ICObench employs a pay-for-reviews model that raises questions about conflicts of interests.
This move demonstrates that the company has made inroads in the $117 trillion global debt securities market through blockchain tech. In 2018, Morningstar had initiated talks with numerous blockchain startups. COO Michael Brawer stated that they were working with various blockchain firms that are seeking to issue debt securities on the blockchain.
He added that they were considering ways they could offer credit opinions, either through credit ratings or credit analytics and data accompanying the assets. Although the company’s rating service includes corporate and government bonds, its work in blockchain will have restrictions on structured finance debt assets.
Morningstar becomes the first credit rating firm to add blockchain
Most rating agencies have highlighted the benefits of adding blockchain technologies to the debt securities space. But Morningstar is the first rating company to devise public models that will efficiently handle this situation. It is challenging other rating agencies such as Fitch, Standard & Poor’s, and Moody’s.
Morningstar plans to debut a complex “smart contract oracle” aimed at introducing credible rating data on the blockchain. The rating firm will use security tokens to offer investors with ratings. The company is entering the blockchain space with a lot of enthusiasm. The entry of Morningstar in the space will be game-changing and could unlock a lot of cash waiting for the moment when digital assets will be deemed credible.