Moody's Says Adoption of Tokenized Funds Indicates 'Untapped Market Potential'

Global financial services company #MOODYS, known for its credit ratings, said the growing adoption of #blockchain-based tokenized funds is increasing the efficiency of investing in assets such as government bonds and points to "untapped market potential." ".

Tokenized funds can also introduce technology-related risks, requiring fund managers to have more diverse technology experience, Moody's analysts said in a report today.

The growth of tokenized fixed income funds is primarily driven by investment in government securities, with yields becoming more attractive following the US Federal Reserve's recent series of interest rate hikes, Moody's said. According to analysts, the issuance of tokenized funds by both traditional institutions and crypto companies backed by such securities grew to more than $800 million on public blockchains by the end of 2023 from $100 million at the beginning of the year.

“The largest issuance to date was made by Franklin Templeton, which initially registered ownership of shares of its US Government Monetary Fund on the Stellar blockchain in 2021 and further expanded the offering to the blockchain Polygon in 2023," Moody's said.

Other examples include Swiss firm Backed Finance, which expanded its Ethereum-based tokenized short-term US Treasury bond ETF offering in October to Base, the Layer 2 network incubated by Coinbase.

UBS also issued a tokenized money market fund on the public Ethereum blockchain through its UBS Tokenize platform in the same month.

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