Moody's: Rapid growth of tokenized funds accompanied by danger signals

According to CoinDesk, credit rating agency Moody's pointed out in its report on Wednesday that although fund tokenization is booming, the serious risks associated with it cannot be ignored by investors. Cristiano Venturicelli, Vice President and Senior Analyst at Moody's Ratings, stated that when evaluating tokenized funds, investors need to weigh their benefits against the risks posed by underlying technology, security, scalability, and regulatory changes. Moody's mentioned that many fund managers lack experience in the early stages of tokenization market development, have small teams and short performance, and face key personnel risks, such as excessive reliance on a few individuals. The departure of key executives or weak governance structures can undermine fund stability. Therefore, Moody's urges fund teams to decentralize responsibilities and strengthen risk management. Blockchain interruption is another risk, stemming from technological novelty. Although smart contracts can improve operational efficiency, they are susceptible to coding defects or malicious attacks. Although using public, permissionless blockchain improves accessibility, it increases potential attack risks. Moody's recommends retaining off chain backups and rigorously auditing smart contracts. The redemption mechanism is also a weak link. Moody's encourages tokenized funds to allow redemptions in both stablecoins and fiat currencies, in order to buffer the impact of events such as stablecoin de anchoring or blockchain disruptions. In addition, tokenized funds operate in different jurisdictions with varying regulatory requirements, and pieced together supervision increases the legal barrier risk for investors to claim compensation. Although some funds adopt a structure that allows token holders to have direct claims on underlying assets, their enforceability depends on local laws and the completeness of fund documents.