Based on Moody's Investors Service report, the implementation of artificial intelligence (AI) and blockchain technology in financial markets could transform the industry and reduce costs for issuers of financial instruments such as bonds within the next five years. The report #acknowledges the initial rise in IT costs and the need for significant investment but emphasizes the long-term potential for lowering expenses and increasing financial market efficiency.
The application of #AI could automate manual tasks, reducing operating expenses for financial institutions, while distributed #ledger technology (DLT) could lower financing costs, particularly for smaller issuers. Furthermore, DLT may improve payment systems and foster financial inclusion. Tokenized bonds present opportunities to decrease transaction expenses, bypass intermediaries like banks, and enhance liquidity in secondary markets.
However, Moody's #report also warns of possible drawbacks, including challenges to sovereign authority and risks of tax evasion, money laundering, and terrorism if the technology is not properly used and regulated. The agency plans to monitor the impact of AI and DLT on credit risk in financial markets.
