Blockchain Faces Hurdles in Covered Bond Adoption Despite Efficiency Gains: Moody’s

Blockchain technology could revolutionize the covered bond market by enhancing transparency and operational efficiency, but widespread adoption remains distant due to legal, technical, and regulatory challenges. Moody's Ratings highlights smart contracts' potential to automate asset substitution and improve investor visibility through real-time data, yet current implementations are limited to on-chain issuance phases.

The path to full integration is obstructed by unresolved issues: off-chain asset anchoring, unproven smart contract enforceability, and regulatory hesitancy toward crypto settlements. Legacy systems and fragmented national frameworks further slow progress. Jurisdictions with adaptable legal structures may lead early adoption, but market-wide blockchain deployment in covered bonds won't happen overnight.