Moody’s sees blockchain benefiting municipalities

Municipalities could cut costs and improve transparency in how they use funds by issuing bonds on a blockchain. While adoption of the technology carries certain risks, Moody’s analysts said, The Block reports.

According to Moody’s, such a use case could trim administrative costs over the life cycle of the securities by about 35%. The risks include cyberattacks, price volatility and regulatory uncertainty.

Widespread issuance of digital bonds will take time, though some projects are already under way. Analysts pointed to “several recent issuances of municipal debt registered on blockchain with parallel accounting.”

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

The report also mentions the revenues municipalities earned from mining.

Thus, the Dickens, Texas-based cryptocurrency mining company Argo Blockchain contributed $17 million to the local budget — 6% of the tax base for 2022.

Experts noted that such dependence carries risks given the volatility of the crypto environment and potential environmental impact. They cited last year’s situation when mining companies lost profitability as electricity costs rose and Bitcoin fell.

«After filing Core Scientific’s bankruptcy filing, the Denton authorities’ $11 million per year from the deal with the company is now in question», Moody’s said.

Earlier in March 2023, the rating agency noted risks of tightening regulation stablecoins in light of the depegging of USDC from the US dollar.

Earlier, BlackRock CEO Larry Fink stated the potential of tokenization to improve efficiency in capital markets.