Blockchain Holds Benefit for Municipalities, Moody’s Says

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A report from international financial research company Moody’s Investors Service which is largely referred to as Moody’s has clarified that municipalities can conserve funds by leveraging blockchain-based platforms. Based on the published statement, these blockchain-based protocols can be used to issue bonds and even perform other government operations, however, it is not without risks.

Moody’s claims that municipalities that introduce blockchain technology into their everyday operations are likely to save up to 35% from administrative costs throughout the lifecycle of a bond. This is not to trivialize the ample amount of time it could take to integrate the blockchain with bond issuance on the municipality level. At the same time, some projects have begun in earnest, according to Moody’s.

The report stated 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.”

So far, blockchain technology has been known to possess an immutable nature that promotes transparency and accountability. With the nascent game changer, the government can streamline certain services and may even perform mobile voting in certain situations. Also, there is the crypto mining sector which could generate massive revenue for the municipalities.

Like in the case of North America, more Bitcoin (BTC) mining companies are interested in setting up their facilities in places like Texas. Almost a year ago, crypto mining company Argo Blockchain began operations in Dickens County, West Texas. The Helios facility on this mining site “accounted for $17 million, or 6% of the county’s $283 million property tax base as of the end of 2022.” 

Potential Risks of Blockchain to Municipalities

Nonetheless, the potential risks which the blockchain industry generally holds can not be overlooked. The danger of cybercrime and regulatory uncertainties for municipalities exist. As per a statement by Moody’s, there are “uncertainties surrounding regulatory and legal frameworks and the future of digital assets.” 

Another uncertainty to consider is the volatility of the crypto industry. Relying on the revenue from crypto mining may be disastrous for any municipality. In so many cases, mining companies have had to suspend operations for several reasons. Last year, Riot Blockchain halted its activities in Texas because of the heat wave in the region, although this was done at the request of the Electric Reliability Council of Texas (ERCOT).

Core Scientific filed for Chapter 11 bankruptcy in Texas when its financial burden became overwhelming.

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