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