Blockchain tech could save municipalities money but adds risks, Moody's says

Quick Take

  • A Moody’s report said municipalities could save money and improve transparency by using blockchain technology.
  • Doing so comes with potential risks, namely cyber attacks and volatility, the firm added.

Moody's said that municipalities can save money by using blockchain-based platforms to issue bonds and for government operations, but doing so comes with possible risks that include cybercrime and operating in regulatory uncertainty.

Municipalities might be able to cut up to 35% of administrative costs over the life cycle of a bond by one estimate, the firm said in a report published on Wednesday.

Blockchain adoption for bond issuance at the municipality level might take some time, although some projects are already underway, Moody's said. However, it added that "several recent municipal debt sales recorded on the blockchain with parallel record-keeping represent an initial small step toward incorporating blockchain in the municipal bond issuance process."

The report outlines a series of pros and cons for different types of crypto-related activities for municipalities.

On the one hand, "the immutable nature of blockchain also enhances transparency and auditability," allowing governments to streamline services and even enable mobile voting in some cases. On the other, that comes with potential risks, like cyber crime and "uncertainties surrounding regulatory and legal frameworks and the future of digital assets," Moody's said.

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