Moody’s Sounds Alarm Over Fast Expansion of Tokenized Assets

Moody’s Warns: Tokenized Fund Boom May Mask Underlying Dangers

The market for tokenized funds is exploding—but so are the risks, according to a new report from credit agency Moody’s Ratings.

Driven by big players like BlackRock and Franklin Templeton, tokenized money market funds have surged 350% over the past year to a combined value of $5.2 billion, based on data from rwa.xyz. While tokenization promises benefits like increased transparency and liquidity, Moody’s cautions that the underlying infrastructure may not be ready for prime time.

“Investors are drawn to the speed and accessibility of tokenized assets, but they need to be just as aware of the risks,” said Cristiano Ventricelli, VP-senior analyst at Moody’s. “We’re talking about untested technology, evolving regulation, and governance structures that may not be robust enough.”

Moody’s pointed to several red flags: small, inexperienced teams running complex funds; the risk of relying too heavily on a single executive; and the fragility of redemption systems, especially during market stress or technical disruptions.

On the tech side, smart contracts—code that automates key fund functions—can be prone to bugs or cyberattacks, especially on public blockchains. Moody’s recommends regular audits and having off-chain backups in case things go wrong.

The report also flagged legal uncertainty. Tokenized funds often operate across multiple jurisdictions, which could complicate investor claims if regulations differ or documents lack legal clarity.

Ultimately, Moody’s says tokenized funds aren’t necessarily unsafe—but they require much stronger safeguards as adoption accelerates.

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