
Tokenized Funds Are Scaling Fast, Hitting $5.7B — Moody's
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Author: Ana Paula Pereira
Date: 3 June 2025cointelegraph.com+5cointelegraph.com+5cointelegraph.com+5
Overview
Tokenized short-term funds, which bridge traditional and decentralized finance, have experienced rapid growth, amassing $5.7 billion in assets since 2021, according to a recent report by Moody's. These funds, typically backed by U.S. Treasurys or other low-risk assets, function similarly to traditional money market funds but utilize blockchain technology to issue and manage fractional shares, enabling real-time settlement.cointelegraph.com
Institutional Adoption and Use Cases
Moody's highlights a growing institutional demand for tokenized money market funds, citing benefits in liquidity, compliance, and operational efficiency. Traditional asset managers, insurers, and brokerages are increasingly interested in offering clients access to these digital financial products.cointelegraph.com+6cointelegraph.com+6cointelegraph.com+6
Emerging use cases for tokenized funds include:cointelegraph.com
Yield optimization for institutional investors as an alternative to stablecoins
Liquidity management for insurance companies
Use as collateral in trading and lending operationscointelegraph.com+2cointelegraph.com+2es.cointelegraph.com+2
Moody's anticipates that assets under management (AUM) in this space will continue to grow, as major wealth brokerages, private banks, and asset management platforms offering digital assets are likely to adopt tokenized short-term liquidity funds to regularly move uninvested cash into yield-earning products.cointelegraph.com
Leading Players
Several key players are driving the growth of tokenized funds:cointelegraph.com
BlackRock's USD Institutional Digital Liquidity Fund leads with $2.5 billion in AUM
Franklin Templeton's OnChain U.S. Government Money Fund follows with $700 million
Other notable participants include Superstate, Ondo Finance, and Circle, each managing between $480 million and $660 millioncointelegraph.com+2cointelegraph.com+2en.wikipedia.org+2
Additionally, companies are exploring tokenization to reach broader markets. For instance, German protocol Midasrecently announced a tokenized certificate backed by U.S. Treasury bills for European investors, offering exposure to yield-bearing government bonds with no investment minimum required.cointelegraph.com+1cointelegraph.com+1
Regulatory Developments
In May, brokerage firm Robinhood introduced a similar initiative to provide European investors with exposure to U.S. markets. The company also submitted a proposal to the U.S. Securities and Exchange Commission (SEC) for a tokenization regulatory framework. Robinhood CEO Vlad Tenev stated, "Tokenization represents a new paradigm for institutional asset allocation."cointelegraph.com
Risks and Considerations
While tokenized funds offer various advantages, Moody's report also notes potential risks associated with blockchain technology, including:cointelegraph.com
Smart contract vulnerabilities
Cybersecurity threats
Network availability issues
Regulatory uncertaintycointelegraph.com
Furthermore, asset representation risks may arise from discrepancies between the blockchain registry and other shareholder records concerning the legal ownership of shares.cointelegraph.com