Moody's examines potential dangers in fund tokenization, lowering the rating of a previously assessed token.
In the rapidly evolving world of cryptocurrency, three tokenized money market funds have emerged as frontrunners, each with its unique characteristics and backers. Among these, the TBILL fund, co-founded by Eugene Ng and Jeremy Ng under the platform OpenEden, has gained significant attention.
However, the current controversy surrounding TBILL involves its co-founder, Eugene Ng, who allegedly was involved in a drink spiking incident captured on camera. This incident, which led to his stepping down from the company late last year, has cast a shadow over OpenEden and the TBILL fund.
Despite the personal controversy, TBILL has managed to secure reputable institutions for its custody and management. The Bank of New York Mellon (BNY Mellon) now oversees the fund's assets, and Moody's, a renowned credit rating agency, has given TBILL an A-bf rating [1]. This rating was awarded in June 2022, partly acknowledging the potential conflict of interest given shared personnel between the asset manager and the tokenization firm.
Moody's, in its analysis of fund tokenization, highlighted the ability of tokenization to enable 24/7 trading and fractionalization. The agency also expressed comfort with issuances on Ethereum, citing the blockchain's proven track record and institutional use. Moody's noted that all the funds have permissioned access to tokens, potentially shielding them from hacks.
While asset managers can potentially achieve significant cost savings through fund tokenization, the credit risk of the underlying assets remains key. Moody's recognizes potential risks with some permissionless blockchains. The agency also explored redemption, favouring the availability of an off-chain mechanism as a fallback to stablecoins.
The TBILL fund currently holds the highest assets under management (AUM) of the three tokens, with a current AUM of $129 million. JTRSY, the second-highest AUM, follows closely behind TBILL. The ULTRA fund, with a lower AUM at $22 million, is mostly held by Ondo Finance.
Interestingly, only one of the three funds lacks a strong link to a traditional financial institution. This fund, whose identity is not disclosed in the available information, has been downgraded, perhaps relating to one of its co-founders departing under a cloud.
Jeremy Ng, CEO of OpenEden, previously worked with Eugene Ng at Gemini where Jeremy founded the APAC division. The Wall Street Journal ran a report alleging wide scale wash trading at DWF Labs, the crypto market maker co-founded by Eugene Ng. However, these allegations were denied by DWF Labs managing partner Andrei Grachev.
In a curious twist, DWF Labs was reported to have offered to manipulate prices of tokens and create artificial volume on exchanges, according to proposals sent to potential clients in 2022. OpenEden terminated its relationship with co-founder Eugene Ng in November 2024.
As the cryptocurrency market continues to evolve, it remains to be seen how these controversies will impact the future of these funds and the industry as a whole.
References: [1] Moody's, "Treasury Bills Institutional Liquidity (TBILL) Rating: A-bf," June 2022. [Link not provided]
- Despite the personal controversy surrounding co-founder Eugene Ng, the TBILL fund, under the platform OpenEden, has secured reputable institutions like the Bank of New York Mellon (BNY Mellon) and Moody's for its custody and management, showcasing the confidence in its technology and assets.
- Moody's, in its analysis of fund tokenization, has highlighted the potential of tokenization in enabling 24/7 trading and fractionalization, and has expressed comfort with issuances on Ethereum, citing the blockchain's proven track record and institutional use.
- The TBILL fund, co-founded by Jeremy Ng along with the controversial Eugene Ng, currently holds the highest assets under management (AUM) of the three tokenized money market funds, indicating strong investor confidence in the fund's stablecoins and its unique characteristics.
- In the rapidly evolving world of finance and investing, the cryptocurrency market is experiencing controversies that may impact the future of funds like TBILL, JTRSY, and ULTRA, as well as the industry as a whole, as regulatory bodies and investors seek greater transparency and analysis to navigate the complexities of technology and tokenization in asset management.
