Summary
The adoption of tokenized investment funds is increasing, but it comes with technical risks, according to Moody’s Investor Services. Tokenized funds are investment funds represented digitally using distributed ledger technology. While tokenization offers benefits such as increased liquidity and collateralization, it also introduces new risks related to DLT. Technical providers have a limited track record, increasing the risk of payment disruption in the event of bankruptcy or technical failure. However, major companies like Franklin Templeton and Goldman Sachs are still participating in the issuance of tokenized assets.
Key Points
1. Adoption of tokenized investment funds is increasing, driven primarily by the tokenization of funds that invest in government-issued debt securities such as government bonds.
2. Technology providers in the tokenized fund space have a limited track record, which contributes to increased risk. Entities involved in technical aspects often have limited track records, increasing the risk of payment disruption in the event of bankruptcy or technical failure.
3. Despite the risks, major companies like Franklin Templeton and Goldman Sachs are participating in the issuance of tokenized assets, indicating that adoption of tokenized funds will continue, according to Moody’s analysts.