Growing blockchain applications bring new revenue streams for software and technology companies and first-mover industry leaders while helping some companies diversify revenue sources by selling blockchain authenticated digital products, said Moody’s recently.
Traceability of supply chains is the most widespread application of blockchain technologies and can help reduce costs and improve several sectors' ESG credentials, said Francesco Bozzano, a VP-Senior Analyst at Moody’s.
"However, growing blockchain applications also present new regulatory, technological, cyber, ESG and execution risks,” he warned.
Software and technology companies like IBM will reap the benefits of companies' increasing blockchain technology adoption, according to the credit rating agency.
Industry leaders in other sectors are also leading blockchain solution investment, including shipping company A.P. Moller-Maersk A/S and e-commerce giants Amazon.com Inc. and Alibaba Group Holding Ltd., will diversify their revenue streams by selling these solutions, the firm added.
Luxury groups like LVMH Moet Hennessy Louis Vuitton SE, retailers like Adidas AG, or media groups like Universal Music Group NV can take advantage of increasing consumer interest in digital technology to create and sell new products certified by blockchain-based NFTs, Moody’s noted.
These products can generate strong margins and profit, but the NFT market is volatile, and these products increase reputational and fashion risk, Moody’s pointed out.
Blockchain-based tracking solutions could reduce operating costs and reduce some ESG risks, according to Moody’s.
Blockchain tracking will simplify information recording, provide customers more transparency, and improve inventory management, the company added.
This is credit positive for companies with large and complex supply chains, from retailers like Walmart Inc. to metal and mining companies like Anglo American PLC, Moody’s said.
While the technology is highly energy-intensive, technological enhancements are underway to reduce the environmental impact of blockchain technology, the firm added.
Digital currency's volatility and lack of regulation create more risks than benefits for companies investing in these assets, Moody’s noted.
For example, companies with investments in cryptocurrency, such as software company MicroStrategy Incorporated and automaker Tesla, Inc., are exposed to the asset's volatility and a lack of regulation and specific accounting guidance, the firm said.