Hello everyone. Good evening. Today, over the next 15-20 minutes, I will try to discuss the issue that underlies every discussion we have in institutional capital markets. And it's not about which stablecoin is the fastest. It's not about which protocol is the most efficient, but the question is which one is more secure, and more importantly, how do we know?
So let's look at what the main problems are in the traditional financial infrastructure. We have a lot of friction. We know there are many problems, but at Moody's we have identified three major, er, expensive, measurable problems. $240 trillion of , uh, liquidity locked up in hundreds of isolated ledgers isolated ledgers that are not designed to interact with each other. This is a problem of mobility for the sake of mobility.
Over a hundred billion dollars are spent on reconciling data between isolated registries. This is not lending, not investing. This is the cost the market pays for data reconciliation each year. This is a problem of volume. And over $10 trillion in foreign exchange is processed every day, subject to settlement risk because our execution speed and settlement speed are completely out of sync with the same problem.
This is a speed problem. The thing is, these three problems don't wait for a solution, because the markets are already reacting because the markets are already reacting . Tokenization could potentially solve the problem or unlock collateral, and stablecoins could potentially settle them. This is a solution that will potentially solve the mobility problem mobility problem . A shared registry across institutions, within institutions, or across jurisdictions could potentially solve the problem of reconciliation.
Potentially, a solution for volumetric and atomic calculations, t plus 0 calculations, or instantaneous calculations instantaneous calculations , done correctly , done correctly , could solve the speed problem. But if you look beyond the mechanics, US dollar-denominated stablecoins are already driving de facto digital dollarization in markets where traditional financial institutions have historically not had much influence. Some large stablecoin issuers hold more US Treasury debt than some mid-sized sovereigns, and incumbent payment service providers that are not fighting stablecoin issuers are actually finding innovative ways to integrate with them. So, stablecoins have already moved from a parallel ecosystem to a mainstream infrastructure, and they are actually potentially seen as a stable settlement asset that could eventually become the driving force behind everything else in their digital economy or digital finance ecosystem. And regulators noticed it.
This map shows that regulators are signaling requirements for mandatory reserve standards reserve standards , redemption rights, operational requirements, and this is unambiguous. Therefore, stablecoin issuers that are able to prove the credit quality of their stablecoins meeting these regulatory requirements in any jurisdiction in which they operate will stand the test of time, while those that fail will have to operate outside of jurisdictions where there are no regulatory requirements. But let me try to answer the question of why I'm talking about credit quality. Moody's is a quality. Moody's is a leading credit rating agency rating agency .
What do they have to do with stablecoins? And I'll try to answer that by first asking you a question. Imagine you are buying a house, any house. Would you give away your savings without an independent structural survey? Someone?
You wouldn't give it away. Even if the house is perfect, your dream home, the seller is honest, someone you honest, someone you probably know, you will still need an independent independent structural inspector to come into the house, check the foundation check the foundation , inspect the plumbing, and give you an independent, honest verdict. This is what a capital market credit rating does in an industry. A is nothing more than a forward-looking opinion, an independent opinion on how an issuer or financial obligation may perform over time, over its lifetime, under stressed market conditions. And this is an institutional issue or an institutional requirement.
And that's why we believe that the key to stablecoin adoption is potentially the stablecoin's credit rating. So, what does it take to evaluate to really think about the potential credit rating of stablecoins? There are many risks. In this case, we have divided them into four main categories or circles. First of all, underlying collateral is pure credit, which is fundamental to any debt instrument that requires a credit rating if they are to comply with the investment mandates that govern capital allocation decisions.
Right? So, the basic collateral, the reserve quality, are they in a separate remote account for bankruptcies? Do credit analysts develop stress scenarios? Something like what happens if 30% of stablecoin holders or investors decide to buy out at the same time? Does the issuer have enough liquid assets or cash to maintain the pegged stablecoin?
Therefore, it is very important to determine or understand and assess the credit quality of the underlying stablecoin underlying stablecoin . The second structure of the transaction, credit scores or credit risk, is ultimately very important when we think about the legal enforceability. Can your share or claim to ownership of a digital asset or token, in this case a stablecoin, be enforced in court? And if so, in which jurisdictions can you make this claim? Therefore, it is very important to have legal enforceability between the token and the underlying collateral.
collateral. Third, operations and counterparties. Who controls the underlying blockchain? What is the mechanism of coinage or burning? What is the governance mechanism around it?
If stablecoins are embedded in corporate treasuries, wholesale banking, even agent commerce, it is already being tested, and people see the potential of stablecoins playing a big role in the aging of AI agents. Systemic interdependence is as important as the quality of the underlying collateral, er, which matters for a debt instrument or asset issuance. Therefore, it is very important to assess this risk, and last but not least, technological risk, oracle risk, smart contract auditing, key management, digital storage value chain validator , the concentration of all this is necessary when it comes to a stablecoin running on a blockchain. And you need to understand all the mechanisms around it, and these four risks together required a rigorous, independent credit system, because it doesn't exist today. So we went ahead and created it.
So, in March 2026, 3 months and three and a half months ago, we launched the industry's first cross-sector stablecoin credit rating methodology , and based on recent research, it's the only credit rating methodology in the world today. It does one basic thing for sure, which is to validate the stablecoin to make sure, or evaluate the stablecoin to make sure, that it can be redeemed at face value on demand under stressed market conditions. It applies to all fiat stablecoins worldwide and is portable with the stablecoin in stablecoin in any jurisdiction where the stablecoin has the legal right to operate. So it's not just focused on the US or the EU, but it applies to every jurisdiction that has a stablecoin methodology. But it is important to understand that the story is not just about stablecoins.
This is broader tokenization, digital finance, the emerging digital economy. Everything is being digitized and digitized. If you look at tokenization, artificial intelligence, private lending, transition finance, emerging markets, global capital markets together, they are all converging. What distinguishes this moment from previous cycles is that innovation does not happen in isolation. The digital economy is no longer a sub-sector.
It effectively becomes the connecting layer of future digital capital markets. But it also introduces new forms of instruments, some tokenized and some new native digital assets, which are expected to have real institutional weight, which is trillions of dollars, right? And the market is not that big yet. And these new types of assets carry new levels of risk. So imagine an artificial intelligence agent autonomously executing a financial decision on the blockchain.
The question of which data point the financial system can trust is becoming more relevant than ever relevant than ever before. And it doesn't happen overnight . This has been happening for several years. We saw digital bonds being issued years ago, in small amounts, as a proof of concept. These digital bond issuances proved that regulated, rated debt instruments can actually exist on the blockchain and perform well.
And that was kind of a signal that this technology had something useful and could be tested at scale. Then we saw the release of tokenized funds tokenized funds , money market funds, private loans, real estate debt, institutional grade instruments , all running on programmable rails programmable rails . This proved that infrastructure is here to stay. But more importantly, it confirmed institutional appetite institutional appetite , and tokenized funds have been growing ever since. But recently, the evolution of stablecoins, they are growing very quickly.
They're growing at a rate that no other asset has potentially...nobody has experienced any other asset potentially growing at that rate...in the history of capital markets, or maybe there's only been one or two such instances. So stablecoins are seen not as a crypto curiosity, but as something even more substantial. They are seen as a stable level of payments, a potential monetary leg for a tokenized economy.
And if you look beyond the data I just showed and start looking at which blockchains are actually executing and transacting these asset classes, you'll notice that one blockchain stands out blockchain stands out . Of course, where many stablecoins are settled, many tokenized instruments are stored, and where credit is granted, is the Ethereum blockchain. But that doesn't mean that other blockchains don't matter, because they do, and in our opinion at Moody's, we believe that the future ecosystem will be multi-chain. It will not be a single blockchain not be a single blockchain , but multiple blockchains that interact with each other with different sets of permissions. But one thing was missing from everything you just saw in the data, and that was a reliable level of credit intelligence.
Because most credit analytics and credit opinions, including Moody's, are currently static, right? How to automate, create and program this? So we used our experience: over 115 years of active credit rating agency experience, evaluating 33,000 transactions across issuers using nearly 200 methodologies. And then there's this digital finance ecosystem that's evolving. We evaluated digital bonds, we evaluated tokenized funds.
Potentially, we will publish public rankings for stablecoins very soon thanks to the methodology. But our credit findings are in press findings are in press releases, in our research reports research reports , and you need to go to our websites to find them and then take them and embed them. And the digital economy does n't work that way. We had to work online. So we decided to create this credit intelligence layer that we created, which we call the token integration engine.
It takes this static credit opinion information, which remains authoritative, but transforms it into a programmable signal that is programmable signal that is autonomous, continuous, event-driven, and available at scale. So ultimately, the bottom line is that our credit methodologies answer the credit question, and our token integration mechanism ensures that the answer is available at the scale, speed, and scale that the digital economy demands, and the token integration mechanism also makes Moody's the only credit rating agency with its own online presence. We do not have our own node infrastructure, and we will be active on many other blockchains besides those where blockchains besides those where we are already present. So I'll be happy to continue the conversation backstage. You can also contact me by email or via LinkedIn email or via LinkedIn .
Uh, Rajiv Bombra again, I see he oversees global digital economy strategy and operations at Moody's ratings. Thank you for your time.
Automatic transcript — names and jargon may be misspelled.