Moody's: Rapid growth of tokenized funds comes with red flags

In a report on Wednesday, ratings agency Moody's noted that while money tokenization is booming, the serious risks that accompany it cannot be ignored by investors. Cristiano Ventricelli, vice president and senior analyst at Moody's Ratings, said investors need to weigh the benefits of tokenized funds against the risks posed by the underlying technology, security, scalability and regulatory changes.
Moody's mentioned that many fund managers have insufficient experience in the early stage of the development of the tokenized market. The team is small and the performance is short, and there is a point person risk that over-reliance on a few individuals, the departure of key executives or the weak governance structure will shake the stability of the fund. Therefore, the fund team is urged to decentralize responsibilities and strengthen risk management. Blockchain disruption is another risk, which stems from the novelty of the technology. Although smart contracts can improve operational efficiency, they are vulnerable to coding flaws or malicious attacks.