Moody’s Sees Benefits of Blockchain for Municipalities


Municipalities can save money and increase transparency in their use by using blockchain to issue bonds. Although the introduction of technology is associated with certain risks. This was stated by Moody’s analysts, writes The Block.

According to the rating agency, such a use case can reduce administrative costs by 35% over the life cycle of securities. Risks of cyberattacks, price volatility and regulatory uncertainty need to be considered.

The popularization of digital bonds will take time, although some projects are already underway. Analysts pointed to “several recent releases of municipal debt registered on blockchain with parallel ledger.”

Another advantage of the technology is its immutable nature, which increases “transparency and verifiability”. This opens up the possibility for authorities to optimize services and, in some cases, even enable mobile voting, the specialists added.

The rating agency’s report also mentions mining revenues received by municipalities.

So, located in the city of Dickens, Texas, the Argo Blockchain cryptocurrency mining enterprise brought $17 million to the local budget – 6% of the tax base for 2022.

Experts noted that such dependence is fraught with risks due to the instability of the cryptocurrency market and the potential impact on the environment. They referred to the situation last year, when mining companies lost their previous profitability amid rising electricity costs and the fall of bitcoin.

“After filing Core Scientific filing for bankruptcy Denton, Texas, $11 million a year from a deal with the company is now in question,” Moody’s said in a statement.

Recall that in March 2023, the rating agency pointed out the risks of tightening regulation of stablecoins against the backdrop of decoupling USDC from the US dollar.

Earlier, BlackRock CEO Larry Fink spoke about the potential of tokenization to increase efficiency in the capital markets.

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