Tokenized Fund Adoption Grows but Brings Technology Risks: Moody's
Tokenized investment funds are gaining popularity, but their technology providers' limited track record could increase risk, according to a report by Moody's Investor Services. Tokenized funds use distributed ledger technology (DLT) to digitally represent investment units. The rise in adoption is largely driven by the tokenization of funds investing in government securities like bonds. The report suggests that tokenized funds could also serve other functions, such as collateral. However, the technology requires additional expertise and could introduce additional risks associated with DLT. Despite these risks, major entities like Franklin Templeton, Goldman Sachs, and Hong Kong’s Monetary Authority have recently participated in the issuance of tokenized assets.
