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The Financial Stability Implications of Tokenized Investment Funds
From libertystreeteconomics.newyorkfed.org
Tokenized investment funds, like their traditional counterparts, engage in liquidity transformation by offering liabilities that can be redeemed on demand and at par while investing in a pool of less liquid assets, thereby making the funds prone to run risk. Tokenization might change the incentives of investors to redeem their shares with the fund that, in turn, could entail benefits for or risks to financial stability. Investors have traditionally treated investment funds as cash management vehicles and a store of value. When capital is needed elsewhere, the shares are typically redeemed for cash directly with the ... (full story)