Summary
Moody’s has published a report highlighting the growing trend of traditional asset tokenization. The report states that the value of tokenized funds has grown from $100 million at the start of 2023 to around $800 million today, with US treasuries being a major driver. The report also notes the efficiency benefits and increased liquidity associated with tokenized assets, which could attract traditional investors. However, Moody’s also highlights the risks involved, including technological malfunctions, regulatory challenges, cybersecurity attacks, and governance issues. The report suggests the adoption of off-chain investor registers and the use of independent and replaceable stakeholders to mitigate these risks.
Key Points
1. The value of tokenized funds has grown significantly, from $100 million to around $800 million, driven by the tokenization of U.S. treasuries. Assets are being brought onto both public and private blockchains, offering stability and technological advantages.
2. Tokenized assets offer significant efficiency benefits, including enhanced market liquidity and accessibility, decreased costs, fractionalization, shortened settlement times, automated processes with smart contracts, and enhanced transparency.
3. Crypto investors are turning to tokenized treasury bills and bonds for stable yields on-chain, as web3 lending markets have seen declining trading volumes and lending rates. Traditional investments that offer comparable or higher yields with lower risks are becoming more appealing. Tokenized money market funds (MMFs) could serve as an alternative to stablecoins as collateral for DeFi lending protocols, though they may be less liquid.