{"id":231732,"date":"2024-01-18T18:36:52","date_gmt":"2024-01-18T13:06:52","guid":{"rendered":"https:\/\/dripp.zone\/news\/?p=231732"},"modified":"2024-01-18T18:36:52","modified_gmt":"2024-01-18T13:06:52","slug":"moodys-vouches-for-efficiency-benefits-of-tokenization-crypto-news","status":"publish","type":"post","link":"https:\/\/dripp.zone\/news\/moodys-vouches-for-efficiency-benefits-of-tokenization-crypto-news\/","title":{"rendered":"Moody\u2019s Vouches For Efficiency Benefits Of Tokenization – Crypto News"},"content":{"rendered":"

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Legacy financial institutions continue to take note of the increasing number of traditional assets being brought on-chain. In a new report, Moody\u2019s, the investment risk assessment firm, highlighted the increasing groundswell of mainstream asset tokenization.<\/p>\n

In a Jan. 15\u00a0report<\/a>, Moody\u2019s said the value of tokenized funds grew from $100M at the start of 2023 to around $800M today, propelled by the increasing tokenization of U.S. treasuries.<\/p>\n

Moody\u2019s said assets are being brought onto both public and private blockchains. Examples include Franklin Templeton\u2019s U.S. Government Money Fund extending from Stellar onto Polygon, Backed Finance launching a tokenized short-term U.S. treasury bond ETF, and UBS Asset Management deploying a tokenized money market fund (MMF) on Ethereum.<\/p>\n

\u201cBy tokenizing MMFs, issuers can combine the stability of MMFs with the technological advantages of stablecoins,\u201d Moody\u2019s said. \u201cAdditionally, applications of tokenized MMFs extend beyond mere purchasing and holding until maturity, suggesting the potential for a more diverse range of uses.\u201d<\/p>\n

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The report also highlights the significant efficiency benefits associated with tokenized assets, suggesting such could drive up adoption among traditional investors as well.<\/p>\n

\u201cFor traditional investors, tokenized funds can enhance market liquidity and accessibility, decrease costs, and enable fractionalization,\u201d Moody\u2019s said. \u201cTokenization can also reduce costs and dependence on intermediaries, shorten settlement times, automate processes with the help of smart contracts, and enhance transparency.\u201d<\/p>\n

DeFi investors turn to legacy assets for yield<\/h2>\n

Moody\u2019s said the increased interest in\u00a0tokenized treasury bills<\/a>\u00a0and bonds echoes increased interest from crypto investors seeking exposure to stable yields on-chain.<\/p>\n

The company noted that web3 lending markets offered greater returns than traditional short-term securities compared to treasury bills or other traditional sources of fiat-denominated interest throughout 2021. However, the trend has since reversed.<\/p>\n

\u201cNow, in a higher-yield environment, as trading volumes and lending rates on DeFi protocols have declined, investments in assets such as U.S, T-bills have become more appealing,\u201d Moody\u2019s said. \u201cThis has motivated crypto investors to shift their funds from crypto assets like stablecoins to traditional investments that offer comparable or higher yields with lower risks.\u201d<\/p>\n

Compound stablecoin rates versus three-month U.S. Treasury yield. Source: Moody\u2019s.<\/figcaption><\/figure>\n

Moody\u2019s added that tokenized MMFs could comprise an alternative to stablecoins as a source of collateral for DeFi lending protocols. However, Moody\u2019s conceded that units in tokenized funds would likely be far less liquid than stablecoins.<\/p>\n

Tokenization risks<\/h2>\n

Despite the report\u2019s bullishness regarding the tokenization of traditional assets, Moody\u2019s highlighted several unique risks associated with the burgeoning sector. The report said tokenization service providers could suffer from technological malfunctions and must traverse diverse and evolving regulatory landscapes.<\/p>\n

\u201cThe management of a tokenized fund requires a wide range of expertise,\u201d the report said. \u201cFund managers and administrators often find themselves handling operations such as token issuance and redemption, maintenance of an on-chain investors’ register, and whitelisting wallets in compliance with KYC and AML checks. These are areas where they might not have extensive experience. They also have to navigate diverse regulatory regimes, considering both the location of the fund\u2019s issuance and the domiciles of potential investors.\u201d<\/p>\n

The report also emphasized the technological risks associated with assets tokenized on public blockchains, including cybersecurity attacks and governance issues. Moody\u2019s recommends the adoption of off-chain investor registers to protect against the risks associated with issuing assets on public blockchains.<\/p>\n

Moody\u2019s suggests that all relevant stakeholders \u2014 \u201cthe technology provider, fund manager, fund administrator, and custodian\u201d \u2014 should also be independent and replaceable to protect against the impact of bankruptcy or other unforeseen circumstances.<\/p>\n

The report also said tokens should be programmed so that fund administrators can restrict asset transfers between whitelisted wallets controlled by accredited investors that have completed know-your-customer and anti-money laundering checks.<\/p>\n

\u201cThis should reduce the risk of cyberattacks or other fraudulent activities by external parties,\u201d Moody\u2019s said. \u201cHowever, it also imposes an additional responsibility on the fund administrator to manage the technology effectively.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Legacy financial institutions continue to take note of the increasing number of traditional assets being brought on-chain. In a new report, Moody\u2019s, the investment risk assessment firm, highlighted the increasing groundswell of mainstream asset tokenization. In a Jan. 15\u00a0report, Moody\u2019s said the value of tokenized funds grew from $100M at the start of 2023 to […]<\/p>\n","protected":false},"author":2,"featured_media":231733,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[274,273,272,244,266,271,268,270,269,267],"class_list":["post-231732","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-de-fi","tag-crypto-finance","tag-decentralized-finance","tag-liquidity","tag-metamask","tag-pancake","tag-slippage","tag-sushiswap","tag-tronlink","tag-trust-wallet","tag-uniswap"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/231732","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=231732"}],"version-history":[{"count":2,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/231732\/revisions"}],"predecessor-version":[{"id":231735,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/231732\/revisions\/231735"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/231733"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=231732"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=231732"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=231732"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}