Tokenized Fund Adoption Grows but Brings Technology Risks: Moody’s

Tokenized investment funds are gaining popularity in the financial industry, but credit-rating agency Moody’s Investor Services warns that the technology providers behind these funds have a limited track record, increasing the risk involved. Tokenized funds are investment funds that use distributed ledger technology to represent their units digitally, allowing for improved liquidity, efficiency, and transparency. The adoption of tokenized funds is primarily driven by funds investing in government securities, indicating huge market potential. However, Moody’s report highlights the need for additional technological expertise in the tokenization process, as it introduces new risks associated with distributed ledger technology. The report also notes that the entities involved in the technology side of tokenization often have limited track records, which could disrupt payments in cases of bankruptcy or technological failures. Despite these risks, major players like Franklin Templeton, Goldman Sachs, and Hong Kong’s Monetary Authority continue to participate in the tokenization of assets.