S&P: Widespread Blockchain Implementation Could Affect Ratings

Standard & Poor’s (S&P) Global recently published a report detailing its view of blockchain technology. The credit rating agency also revealed how blockchain development could change its credit ratings of financial institutions.

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Blockchain Could Affect Credit Ratings

Known for its stock market indices such as the S&P 500, the company is one of the Big Three credit rating agencies. The other two are Moody’s Investors Service and Fitch Rating.

In a new report entitled “The Future Of Banking: Blockchain Can Reshape The Financial System?” S&P acknowledged blockchain‘s impacts on financial institutions. It noted that the rising investment in the technology “suggests that a transformation of the global financial industry could be underway.” This report is published by S&P Global Market Intelligence, a division of S&P Global.

However, the report states that since blockchain is still in an early stage of development, “it is not clear what impact it may have on our ratings in the industry.” Due to factors such as consensus requirements among market participants and regulatory approval, “market-wide adoption is a long way off,” S&P says. The rating agency further noted that:

“It [blockchain technology] could play a role in our analysis if we believe the technology marginalizes certain business models or enables a company to develop a distinct competitive advantage.”

S&P is closely monitoring blockchain development which “could consider rating changes if its widespread implementation occurs faster than we currently expect.” Companies whose ratings will be impacted are those with operating models that will be significantly changed by blockchains.

S&P Sees Blockchain Benefits

Overall, S&P recognizes the benefits of the technology. “We believe that, at the very least, blockchain presents an opportunity for financial institutions,” the report says.

The technology can streamline back-office operations which would cut costs. It will also shorten settlement times, facilitate payments and “even generate new revenue streams,” S&P suggested.

The company expects larger financial institutions to start using blockchains over the next two years but “in a narrow context.”

When do you think S&P will consider blockchain technology seriously? Let us know in the comments section below.

Images courtesy of S&P, Shutterstock

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