Tokenized fund adoption continues, but brings technical risks: Moody’s | CoinDesk JAPAN

Adoption of tokenized investment funds is on the rise, but technology providers have a “limited track record” and contribute to increased risk, rating agency Moody’s Investor Services says. This warning was issued in a report released on April 15th.

A tokenized fund is an investment fund whose investment unit is digitally represented using distributed ledger technology (DLT), which is the basis of crypto assets (virtual currency). Tokenization of assets and funds is receiving significant attention as financial institutions around the world seek to improve market liquidity, efficiency, and transparency. The growing adoption of tokenized funds, driven primarily by the tokenization of funds that invest in government-issued debt securities such as government bonds, is an untapped market, according to a report from Moody’s DeFi and Digital Assets team. It shows possibility.

“The potential uses of tokenized funds go beyond simply increasing asset liquidity. These funds could have a variety of other functions, including serving as collateral,” the report said. Says.

However, the report’s authors warn that tokenization requires “additional” technical expertise. To begin with, investment funds involve risks arising from the underlying assets and fund management. According to the report, tokenized funds may introduce new risks related to DLT.

“Entities involved in technical aspects often have limited track records, increasing the risk of payment disruption in the event of bankruptcy or technical failure,” the report said.

However, Moody’s analysts believe that this will not stop adoption. Major companies, from Franklin Templeton and Goldman Sachs to the Hong Kong Monetary Authority (HKMA), have recently participated in the issuance of tokenized assets.

｜Translation: CoinDesk JAPAN
｜Edited by: Toshihiko Inoue
｜Image: Shutterstock
｜Original text: Tokenized Fund Adoption Grows but Brings Technology Risks: Moody’s