Tokenized Investment Funds Adoption Rises Despite Increased Risk, Says Moody's Report

According to CoinDesk, a recent report by Moody's Investor Services highlights the growing adoption of tokenized investment funds, despite the increased risk due to technology providers having a limited track record. Tokenized funds are investment funds whose units are digitally represented using distributed ledger technology (DLT), which powers cryptocurrencies. The adoption of tokenized funds is primarily driven by the tokenization of funds that invest in government securities like bonds, signaling untapped market potential. The report by Moody's DeFi and Digital Assets team states that tokenized funds have potential applications beyond enhancing asset liquidity, such as serving as collateral. However, the authors of the report warn that tokenization requires additional technological expertise, and investment funds come with their risks stemming from underlying assets and fund management. Tokenized funds could bring additional risks connected to DLT, as the entities involved on the technology side often have limited track records, increasing the risk of disrupted payments in case of bankruptcy or technological failure. Despite these risks, adoption of tokenized funds continues to grow, with major players like Franklin Templeton, Goldman Sachs, and Hong Kong's Monetary Authority recently participating in the issuance of tokenized assets.