Blockchain applications may prompt S&P to adjust rankings of large banks

Rage Commentary : Standard & Poor's, an authoritative financial analysis agency in the United States, provides corporate rating services to global institutions. This week, the agency talked about the development trend of blockchain technology for the first time, pointing out that the impact of blockchain technology is growing, so once the technology becomes popular, it will affect S&P's large bank ratings. However, blockchain will not be popular in the short term, so the rating results will remain unchanged for a considerable period of time.

Translation: Annie_Xu

Standard & Poor's (S&P), an authoritative financial analysis agency in the United States, said that if blockchain applications become popular and begin to affect existing business models, it may consider adjusting the rankings of large financial institutions.

SP reported this week that it believes the continued rise in blockchain funding indicates that the financial industry is about to begin a transformation.

The blockchain is a giant decentralized ledger for digital currencies that records every transaction on a global network, making it tamper-proof. Banks see the technology as a way to cut costs and prevent fraud in areas such as remittances and securities trading without relying on third parties.

S&P said the technology could simplify back-end operations, shorten settlement and clearing times, provide payment options and increase revenue for financial institutions such as banks and asset managers.

However, the widespread application of blockchain is unlikely to be achieved in the short term.

“While blockchain technology may have niche applications, it will take a long time for it to be widely adopted by the market because it first requires consensus among market participants and, in some cases, regulatory approval.”

“So we don’t think blockchain will affect the ratings of corporate institutions in the short or long term. But we will consider it, depending on the application of blockchain technology and its performance in the financial industry; this technology will greatly affect the business model of institutions.”

S&P said that blockchain technology will increase the competitive advantage of enterprises and even eliminate the relevance of certain business models. In terms of market ratings, S&P said that if the speed of blockchain popularization is faster than expected and significantly affects the operating model of financial institutions, the company will consider adjusting the rating results.

Many large banks are now testing blockchain technology, such as R3 and financial institutions working together to test blockchain use cases. This week, Wells Fargo and Commonwealth Bank of Australia demonstrated the first practical use case, using blockchain technology to process and execute a batch of cotton trade and track the entire journey of the goods from the United States to Qingdao.