Analyst explains why crypto lender Ledn earned an A- rating

Mauricio Di Bartolomeo, chief sales officer at Ledn , a crypto lending platform, revealed that an analysis by Decision Technology rated Ledn’s lending business as A- (‘A minus’) credit quality.

Di Bartolomeo asked Henry Stott, Managing Director at Decision Technology, to elaborate on the rating, its implications, and the methodology used to assess Ledn’s credit risk.

The collapse of lenders like Celsius, BlockFi, and Voyager has made counterparty risk a major concern in crypto lending. Many firms that once touted high creditworthiness collapsed under market volatility and exposure to risky borrowers.

Ledn, however, appears to be positioning itself as a safer alternative. An A- credit rating indicates low credit risk and a strong ability to meet financial commitments but with a slightly higher vulnerability to economic downturns compared to higher-rated entities (e.g., A or AA). In traditional finance, it suggests solid financial health and reliable risk management, making defaults unlikely.

Stott explained that the A- rating is somewhat analogous to traditional credit ratings by S&P and Moody’s, but that such ratings in the crypto sector come with added complexities.

“The use of the term A minus obviously, and is that an allusion to S&P who have these ratings and have a history of how often those things default? But at that point, it's quite ambiguous,” Stott said.

According to Stott, S&P focuses on whether a counterparty will default, while Moody’s assesses expected losses. The distinction matters because the two rating agencies prioritize different risk factors, and crypto lending doesn’t always fit neatly into these models.

Breaking down Ledn’s Risk profile

Decision Technology assigned a 0.43% probability of default over the next 12 months to Ledn’s lending arm. Stott explained that in the event of default, the expected loss severity is around 10%, significantly lower than the industry norm of 40-50%.

“So let's say over the next 12 months, what's my probability of a default event where we can talk about what the actual definition might be. But someone's asked me for money and I've said I haven't got it in some way. What's the probability of that happening in the next 12 months? And then if that happens, actually how much of my exposure to that organization am I ever going to see again—the so-called severity or loss given default,” Stott explained.