Share this article
Tokenized Fund Adoption Grows but Brings Technology Risks: Moody's
Entities providing tokenization tech have a limited track record and may contribute to increased risk, a new report by analysts at the credit-rating agency says.
Jan 15, 2024, 9:00 a.m.
Make us preferred on Google
The adoption of tokenized investment funds is on the rise – but the technology providers have a “limited track record,” contributing to increased risk, a Monday report by credit-rating agency Moody’s Investor Services warned.
Tokenized funds are investment funds whose units are digitally represented with the use of distributed ledger technology (DLT), which powers crypto. Asset or fund tokenization is having a moment as financial institutions worldwide attempt to improve market liquidity, efficiency and transparency. The growing adoption of tokenized funds – mostly fueled by the tokenization of funds that invest in government securities like bonds – signals untapped market potential, according to the report by Moody's DeFi and Digital Assets team.
STORY CONTINUES BELOW
Don't miss another story.Subscribe to the Crypto Daybook Americas Newsletter today. See all newsletters
“Tokenized funds’ potential applications extend beyond merely enhancing asset liquidity. These funds have a variety of other possible functions, including serving as collateral,” the report said.
However, tokenization requires “additional” technological expertise, the report’s authors warned. Investment funds come with their risks stemming from things like the underlying assets and fund management. Tokenized funds could bring additional risks connected to DLT, according to the report.
“The entities involved on the technology side often have limited track records, increasing the risk that in the case of bankruptcy or technological failure, payments may be disrupted,” the report said.
That’s not stopping adoption, though, according to Moody's analysts. Big players from Franklin Templeton and Goldman Sachs to Hong Kong’s Monetary Authority have recently participated in the issuance of tokenized assets.
More For You
KuCoin captured a record share of centralised exchange volume in 2025, with more than $1.25tn traded as its volumes grew faster than the wider crypto market.
What to know:
- KuCoin recorded over $1.25 trillion in total trading volume in 2025, equivalent to an average of roughly $114 billion per month, marking its strongest year on record.
- This performance translated into an all-time high share of centralised exchange volume, as KuCoin’s activity expanded faster than aggregate CEX volumes, which slowed during periods of lower market volatility.
- Spot and derivatives volumes were evenly split, each exceeding $500 billion for the year, signalling broad-based usage rather than reliance on a single product line.
- Altcoins accounted for the majority of trading activity, reinforcing KuCoin’s role as a primary liquidity venue beyond BTC and ETH at a time when majors saw more muted turnover.
- Even as overall crypto volumes softened mid-year, KuCoin maintained elevated baseline activity, indicating structurally higher user engagement rather than short-lived volume spikes.
More For You
How a 'perpetual’ stock trick could solve Michael Saylor’s $8 billion debt problem
The bitcoin treasury firm is using perpetual preferreds to retire convertibles, offering a potential framework for managing long-dated leverage.
What to know:
- Strive upsized its SATA follow on offering beyond $150 million, pricing the perpetual preferred at $90.
- The structure offers a blueprint for replacing fixed maturity convertibles with perpetual equity capital that removes refinancing risk.
- Strategy has a $3 billion convertible tranche due in June 2028 with a $672.40 conversion price, which could be addressed using a similar preferred equity approach.
Top Stories
