Artificial intelligence (AI) and blockchain technologies are predicted to reach a “tipping point” according to a report by Moody’s Investors Service. The report highlights that the combined impact of AI and blockchain, also known as distributed ledger technologies (DLTs), will have effects that go beyond corporate balance sheets and reshape entire sectors. Established industries may shrink or disappear altogether, while new markets emerge in fields such as content generation, mobility, education, and healthcare. The report acknowledges the uneven performance of cryptocurrencies and decentralized finance, which have resulted from the adoption of DLTs over the past 18 months.
Furthermore, the report suggests that AI will contribute to economic growth by increasing productivity through task automation, thus mitigating the effects of aging and shrinking populations in many countries. DLTs, on the other hand, offer benefits such as financial inclusion and modernizing payment systems. However, the report cautions that these benefits are unlikely to materialize in the near term, anticipating that they will take place within the next decade.
In terms of global financial markets, the report argues that AI and DLTs will improve process efficiency and create new products, ultimately enhancing the credit profiles of financial firms. This positive impact is contingent on addressing financial, regulatory, and cybersecurity risks adequately. The report emphasizes the need to navigate risks and opportunities, as it states, “The coming transformation will bring process efficiency and new products, but also amplify existing risks and give rise to new ones.” It identifies five broad channels through which these risks and opportunities will affect debt issuer credit profiles, with the sectors and issuer strategies experiencing varying degrees of impact.
The technologies’ influence extends to measures of credit risk, including business strategy and implementation, financial performance, governance and risk management, and industry and economy-level changes. The report acknowledges that while the overall economic and financial effects of technological advancements are expected to be positive, there will likely be significant differences in how the costs and benefits are distributed among individuals, companies, and countries.
In conclusion, the report from Moody’s Investors Service predicts that AI and blockchain technologies will have a transformative impact on various industries. While established sectors may shrink or vanish, new markets will emerge. AI is expected to promote economic growth, and DLTs offer benefits such as financial inclusion. However, it is crucial to address the risks associated with these technologies to fully realize the potential benefits. The report highlights the importance of navigating risks and emphasizes that the distribution of costs and benefits will vary among stakeholders. Overall, the advancements in AI and blockchain hold immense potential but require careful management to maximize their positive impact.
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