According to CoinDesk, international credit rating agency Moody’s Investors Service warned in a report on Monday (15th) that the adoption rate of tokenized investment funds is increasing, but at the same time, technology vendors have a “limited track record,” which could lead to increased risks.
Tokenized funds refer to investment funds that digitize fund units using distributed ledger technology (DLT). As global financial institutions try to increase market liquidity, efficiency, and transparency, the tokenization of assets or funds is gaining momentum. Moody’s DeFi and Digital Assets team pointed out in the report that the growing adoption rate of tokenized funds, mainly driven by tokenized funds investing in government securities such as bonds, demonstrates untapped market potential.
Moody’s report states:
However, the report’s authors warned that tokenization requires “additional” technical expertise. Investment funds themselves come with risks originating from aspects such as underlying assets and fund management, and tokenized funds may bring additional risks related to DLT. The report states:
Despite the aforementioned risks, Moody’s analysts believe that this will not hinder the adoption of the technology. Large institutions such as Franklin Templeton, Goldman Sachs, and the Hong Kong Monetary Authority have recently participated in the issuance of tokenized assets.
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