Korea Investors Service prepares to rate credit in digital finance
Korea Investors Service (KIS) is developing new criteria to assess the credit risks of digital financial products as tokenized securities and stablecoins become more integrated into the mainstream financial system. The Moody's affiliate said Monday that digital financial products can carry risks that differ from those of conventional products, even when they have the same credit rating. "While…
The Korea Investors Service (KIS), a Moody's affiliate, is forming guidelines to evaluate the credit risks associated with digital financial products as blockchain-based assets and stablecoins gain wider acceptance in the financial industry. In a press conference on Monday, Chung Hyuk-jin, the head of KIS's credit standards division, cautioned that digital financial products could pose risks distinct from traditional ones, even when they share the same credit rating.
He explained that the benefits of automation and immediate settlement, such as reduced costs, could be offset by the emergence of novel avenues for disruptions and losses. These risks can originate from platforms, smart contracts, and the settlement mechanisms that facilitate digital transactions. Consequently, KIS believes that assessing digital financial products should encompass technological risks alongside conventional factors like the issuer's repayment ability, the creditworthiness of underlying assets, collateral, and repayment priority.
KIS categorizes these risks into four groups: platform risk, smart-contract risk, external risk, and issues related to the representation of legal rights. Stablecoins, a type of digital currency, have been identified as a particular area of concern in this evolving landscape.
Written by urgent.news from The Korea Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
