'DeFi's federal bank': Standard Chartered sees SKY token rising fivefold by end-2028

Standard Chartered Bank has initiated coverage of DeFi platform Sky, formerly MakerDAO, forecasting that its SKY token will rise fivefold to $0.325 by the end of 2028 from about $0.065 currently.

The bank calls Sky "DeFi's federal bank" because it issues stablecoins, creates a governance framework and charges a wholesale rate of interest to borrowers.

"In the off-chain world, Sky would be akin to a central bank, issuing currency (USDS and DAI), setting governance rules for the agents, and lending money at wholesale interest rates," Geoffrey Kendrick, Standard Chartered's global head of digital assets research, wrote in a Friday report. "The agents are akin to commercial banks that borrow at the wholesale rate and decide where to allocate the borrowed funds to earn an interest spread."

Sky's three main agents, Spark, Grove and Obex, have borrowed a combined $5.9 billion in USDS, Kendrick noted. They put those funds into yield strategies and pay Sky a base interest rate, currently 3.8%.

Spark focuses on crypto lending, including through protocols such as Aave and Morpho. Grove allocates to real-world assets, including products from firms such as BlackRock, Janus Henderson and Apollo. Obex brings specialist capital allocators into the Sky ecosystem.

Sky also earns income from USDC held through Coinbase in its "peg stability module," which allows swaps between USDS and USDC, and from its older DAI-related crypto lending vaults, Kendrick noted.

He expects growth in Sky's USDS stablecoin business and a larger share of income going to token holders through staking rewards and buybacks.

"We estimate that the value Sky passes on to SKY token holders will increase 5x by end-2028 from today’s level, driven by growth in both the Sky ecosystem and USDS outstanding. All other things being equal, this should drive a 5x rise in the SKY price," Kendrick wrote.

Kendrick said his projections imply SKY would broadly match ether's price gains and outperform bitcoin through end-2028.

How expected growth could benefit SKY token holders

Kendrick sees two stages to his forecast. First, Sky could distribute more of its existing income once it builds a larger financial buffer. Then, more USDS borrowing could increase the income available to distribute.

Sky currently has about $90 million in its reserve buffer, known as aggregate backstop capital. It keeps part of its income to build that reserve.

At the current pace, the buffer could reach $150 million in about eight months, Kendrick estimated. If it also reaches 1.5% of outstanding USDS supply, the amount available for SKY staking rewards and buybacks could double.

Further growth could come from lending. Spark, Grove and Obex have combined borrowing limits of $17.5 billion, almost three times their current borrowings. Borrowing up to those limits could generate another two- to threefold increase in income, assuming interest spreads stay constant, Kendrick said.

The price forecast also assumes SKY's staking yield, currently 4.2%, stays around that level. Under that model, higher rewards would support a higher token price. Kendrick described SKY as primarily a "staking yield" token, with buybacks playing a smaller role.

Overall, Kendrick continues to forecast the overall stablecoin market will reach $2 trillion by end-2028, but is less certain how much demand will go to yield-bearing stablecoins such as those offered by Sky and Ethena.

"The main risk to this view would be if yield-bearing stablecoin growth is slower than expected," Kendrick wrote.

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