Centralized Custody

Methodologies Sub-Methodologies
1

Introduction

The Credora Centralized Custodian Sub-Methodology evaluates the creditworthiness of custodians responsible for holding reserve assets of derivative tokens and stablecoins in custody. Part of the Sub-Methodology Layer of the Credora Token Rating Framework, it combines quantitative and qualitative factors to produce a Probability of Default (PD). The PD outputs from this methodology layer serve as inputs for subsequent methodology layers.

Key Sections

Below is an overview of the core sections covered in the methodology document:

  1. Anchor PD Determination: Derived from the average PD of the global custodian industry, represented by members of the Association of Global Custodians (AGC).

  2. Modifiers: Modifiers refine the Anchor PD to capture risks faced by digital asset custodians, differentiating the risk profiles of digital asset custodians from the benchmark set via the Anchor PD evaluation. They include:

    • Listed Status and Financial Transparency: Evaluates the custodian’s financial transparency and operational risk mitigation practices.
    • Regulatory Oversight and Licensure: Reflects the degree of regulatory rigor, supervision, and licensing applicable to digital asset custodians.
    • Business Type, Reputation, and Track Record: Evaluates the incremental risks introduced by factors such as a relatively weak reputation and low track record as well as the inherently elevated operational risk pertaining to the digital assets custody business.
    • Insurance Coverage: An indicator of enhanced risk management and operational controls.

  3. Final Output: Incorporates all adjustments to produce a PD, implied rating and Credora risk score.

  4. Framework Integration: Outputs form the foundation of the Calibration Layer evaluation.

Access the Full Documentation

You can view the complete Centralized Custody Sub-Methodology on GitBook.

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