Credit rating agency Moody’s partners with Monetary Authority of Singapore Project GuardianThe company announced on Wednesday a public-private tokenization collaboration initiative aimed at improving market efficiency.
The firm plans to provide risk analysis for Project Guardian, which is set to launch in 2022. In particular, Moody’s will look at fixed income products, including stablecoins, tokenized deposits, fractional funds, and other digital asset securities.
“At its core, tokenization is about redefining traditional asset ownership and transaction frameworks by integrating digital and physical assets. With a sophisticated technology framework and a streamlined or interoperable infrastructure, tokenization has the potential to drive significant growth,” Rajeev Bhamra, head of digital economy strategy at Moody’s, told The Block in an email.
Tokenization, the process of representing “real-world assets” as digital tokens on a chain, is a growing field that is attracting the attention of some of the largest global financial firms, who see it as a means to make investments more transparent and efficient.
January 15th reportMoody’s said the value of tokenized funds increased from $100 million to about $800 million through 2023, driven by the rise in tokenization of U.S. Treasuries. Today, that number is Over $1.5 billion. Firms like BlackRock, Franklin Templeton, and UBS Asset Management have deployed tokenized funds on public blockchains.
Bamra said both institutions and investors are becoming more aware. The capabilities and robust infrastructure that underpin these on-chain products are in place, and there is great potential for further growth in this space.
“These developments democratize access to traditionally illiquid assets, enhance transaction transparency, and provide new avenues for fractional ownership and global market participation,” Bamra added, citing sectors ranging from art to commodities, real estate to intellectual property.
Project Guardian is a multi-year initiative involving policymakers and major financial institutions around the world, including the UK’s Financial Conduct Authority (FCA), Switzerland’s FINMA and Japan’s FSA. Deutsche BankCiti and Apollo. This effort is being piloted in fixed income, asset management and foreign exchange.
“Moody’s independent risk assessment is intended to enhance market transparency, reduce systemic risk, and facilitate the growth of the tokenization industry,” the firm wrote. “The emergence of digital risks underscores the importance of robust cybersecurity measures and regulatory frameworks to protect the integrity and resiliency of tokenized assets,” Bamra noted.
The company’s analysts have previously said that the development of blockchain-based secondary markets would be crucial in driving adoption of real-world assets.
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