When a fund's smart contract pauses transfers, redemption is likely still possible, but it depends on what type of 'transfer' is paused. If primary market subscriptions and redemptions are paused, investors cannot redeem. If only secondary market peer-to-peer (P2P) transfers are paused, redemption through official channels may still work.
First, understand which type of 'transfer' is paused
Tokenized funds involve two separate trading systems. Suspending subscriptions/redemptions applies to requests you submit directly to the fund company through the fund's official channel (app or website). Suspending on-chain transfers applies to sending fund tokens from your wallet to another wallet. These are two different actions, and the pause logic is separate.
According to the tokenized fund regulatory framework published by Hong Kong's Securities and Futures Commission (SFC) in April 2026, primary market subscriptions/redemptions and secondary market trading are clearly treated separately. Product providers need to prepare contingency plans for suspended primary transactions, including considering whether to temporarily stop secondary market trading. This means suspended subscriptions/redemptions are a risk scenario regulators have already explicitly considered.
Whether redemption is still available depends on the contract code's 'pause scope'
The ERC-7540 tokenized vault standard provides an asynchronous redemption request mechanism: after you submit a redemption request, the redemption is not executed immediately. Instead, it enters a pending queue, and the actual transfer between assets and the vault is delayed. This mechanism separates redemption request submission from actual fund settlement, giving redemptions more operational resilience.
However, if the contract-level requestRedeem function is paused, redemption requests cannot be submitted. The ERC-7887 extension standard clearly states that when a redemption cancellation request is pending, new redemption requests will be blocked. This shows the contract logic itself has a 'pause/block' mechanism.
Pause triggers in extreme scenarios: Traditional fund contracts clearly list situations where fund managers can suspend accepting redemption requests: force majeure, huge redemptions on two or more consecutive open days, major uncertainty in the valuation of assets representing over 50% of the fund's net asset value on the previous valuation day, etc. Under the regulatory framework, tokenized fund redemptions still follow similar rules, but the pause is implemented through 'smart contract restrictions' instead of an 'administrative order'.
Alternative path when redemption is not paused
If the contract pauses P2P token transfer but the redemption channel is still open, investors can still submit redemption requests through the fund's official app/website, converting shares into stablecoins. The money then returns to your wallet as stablecoins.
In its 2025 report, Moody's clearly suggested that tokenized funds should allow redemption in both stablecoins and fiat currency to buffer the impact of blockchain outages or stablecoin de-pegging. This shows that industry best practices already consider backup options when one redemption path is blocked.
How long redemption money takes to arrive
Even under normal market conditions, tokenized fund redemption is not instant. OSL Wealth's rules clearly state: redemption is an unknown-price transaction, meaning the amount you receive is determined by the next unit net value published by the fund company. There is also a trading day cut-off time — orders submitted before the cut-off time count as T day orders, and those submitted after count as T+1 day orders. This means from submitting a redemption request to finally receiving stablecoins, there is a T+0, T+1 or longer delay, depending on the product rules.
Next steps
Read the pause announcement carefully: Clarify whether it pauses 'on-chain token transfer (P2P)' or 'primary market redemption'.
Check the redemption page in the fund's app or website: If the official channel still works, your redemption right is basically intact.
Confirm the redemption time rules: Check the product's cut-off time and net value confirmation rules, and plan your submission time.
See if both stablecoin and fiat redemption channels are available: Moody's suggested dual channels are a reference indicator of product risk management.
