Moody's Investors Service (MIS) recently released a detailed report that names 120 blockchain projects being explored by various companies. The bond credit rating business then offers 25 top use cases for blockchain technology.
The report, “Credit Strategy -- Blockchain Technology: Robust, Cost-effective Applications Key to Unlocking Blockchain's Potential Credit Benefits,” explores how blockchain tech potentially can improve record-keeping and transactional efficiencies across many different processes and industries.
A prime example is capital markets, where the technology could be used to eliminate the need for reconciling separate ledgers, synchronizing all transactions into one blockchain. The report also states that widespread adoption is still not here.
Moody’s Corporation (NYSE: MCO) is the parent company of MIS. Moody’s opearates in two reportable segments: MIS and Moody’s Analytics (MA).
While MIS publishes credit ratings on debt obligations, and the entities that issue them, MA develops a wide range of products and services that support financial analysis and risk management activities.
With a presence in 36 countries and approximately 10,800 employees, the corporation reported revenue of $3.48 billion in 2015. Global MIS revenue was $2.33 billion, representing 67% of Moody’s total revenue.
MIS authors thousands of pages of research each year. The firm's ratings and analysis cover more than 120 countries, approximately 11,000 corporate issuers, 20,000 public finance issuers, and 68,000 structured finance obligations, according to the 2015 annual report. The company reported that Moody’s research website was accessed by over 259,000 individuals including 34,000 client users.
MIS has been consistently ranked as the top US credit rating agency. Institutional Investor has named the business “#1 US Credit Rating Agency” four years running. AsiaMoney’s Fixed Income Poll named it “#1 Asia Credit Rating Agency” for the fourth year in a row too.
“Moody’s mission is to be the world’s most respected authority serving risk-sensitive financial markets. Whether through the Company’s credit ratings, research or growing risk management and professional services solutions, Moody’s contributes to the efficiency and transparency of global financial markets.”
- Henry A. McKinnell, Jr. Moody's Chairman of the Board
Use cases for bitcoin’s technology have been compiled into lists for several years by various bloggers, forum posters, and technology journalists trying to make sense of bitcoin’s future.
In June 2015, megabank Santander’s venture capital arm, Santander InnoVentures, claimed to have internally identified 20-25 use cases for blockchain technology, all related to banking and finance. Unfortunately, the researchers did not publish their findings.
Deutsche Bank has also been looking at blockchain the technology, for more than two years. While the technology has been explored in payments markets the most, Edward Budd, Managing Director of Global Transaction Banking at Deutsche Bank, sees more potential for it in securities.
“When you look at blockchain use cases in the already highly efficient and lean wholesale payments market,” Budd pointed out in January, “the question is why the market should invest to move to a blockchain based solution? We see more potential for blockchain in the securities world.”
“Our positive view of blockchain’s ability to meet the needs of a large financial ecosystem is tempered by the time aspect. We take a 5-10 year view on true network wide adoption but from what we have seen there will definitely be commercial use cases in a 12-24 month period.”
- Edward Budd, Managing Director of Global Transaction Banking at Deutsche Bank
Many institutions have done similar blockchain research, concluding that blockchain technology will initially be applied in capital markets. In the long run, they tend to agree with Ledra’s mega master blockchain list, there may be far more uses outside of finance.
IT consulting and outsourcing firm Cognizant released a whitepaper in April, “Blockchain in Banking: A Measured Approach.” The paper listed six financial and thirteen non-financial uses for blockchains. All 19 examples were being attempted by a named company.
The 25 use cases in the recent Moody’s report also includes a variety of implementations. Each has several paragraphs defining them, listing companies working on them, and some history of each example.
"There is significant enthusiasm for the potential of the technology, but there is still a limited track record of large-scale blockchain implementation in a regulated environment, and many hurdles lie ahead before we see widespread applications."
- Robard Williams, Moody's Senior Vice President
Obvious examples like international payments and real estate made the list, each with a history of the companies pushing them forward. Other, less obvious uses are offered too, like tax records, energy credits, and healthcare records.
The report also identifies four general approaches to blockchain tech development, which it says may or may not be combined in practice. “Investments in blockchain-focused start-ups,” “Partnerships with blockchain-focused start-ups,” “Internal projects with or without support from blockchain-focused consultancy and technology firms,” and “Industry collaborations among a group of corporations and/or the official sector.” All of the 120 companies they name fit neatly into one of those four types, and all are growing, according to the report.