Yesterday Moody’s published an analysis of fund tokenization, drawing from its experience in assessing three tokenized money market funds. Of those three, only one lacks a strong link to a traditional financial institution. That one was downgraded, perhaps relating to one of its co-founders departing under a cloud. We’ll explore that and another related controversy.
The credit rating agency highlighted the many benefits of fund tokenization, including the ability to trade 24/7 and fractionalization, which benefits both asset managers and investors. Additionally, asset managers can potentially achieve significant cost savings.
The credit risk of the underlying assets is key, but in all cases, these are money market funds, which usually attract good ratings. Moody’s recognizes potential risks with some of the permissionless blockchains, the lack of track records of the tokenization startups and/or asset managers and potential regulatory issues. Last year the rating agency raised similar issues.
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