Tokenization, the representation of real-life assets on blockchain, could reshape both cryptomarkets and traditional finance, while introducing new risks that regulators are not yet equipped to manage, according to the International Monetary Fund (IMF).
In a new Reportthe IMF described tokenization as more than a technological upgrade to markets. By moving assets such as money, bonds and funds onto shared blockchains, transactions can be settled instantly, cutting out intermediaries and reducing the delays that define today’s markets.
The IMF says the “atomic settlement” that tokenization brings to the financial world could reduce counterparty risk and force firms to manage liquidity in real time.
“Stress events are likely to unfold quickly, leaving little time for discretionary intervention,” the report said. “Therefore, tokenized asset management must be anchored in secure settlement assets, legally recognized finality, and strong governance arrangements to ensure stability.”
The report points to stablecoins — tokens whose value is pegged to a fiat currency — as an important bridge between crypto and traditional finance. The report states that these could become widely used settlement assets in tokenized platforms.
Still, their reliability depends on the reservoir and redemption system, which puts them under pressure.
The IMF also warned that fast, automated markets could exacerbate volatility, while smart contracts that trigger margin calls or liquidations could accelerate sell-offs during downturns. Crypto markets have witnessed such rapid declines,
Tokenized assets can also move quickly across jurisdictions, complicating oversight and raising concerns about capital flight and currency substitution in emerging markets, the IMF wrote.
The organization called for a clear legal framework and stronger global coordination, arguing that without them, tokenized finance could deepen fragmentation rather than improve efficiency.
Tokenization has been a growing topic in the crypto sector. The real-world assets involved in blockchain rails are already worth $23.2 billion. D. Philama With the exception of data stablecoins, the majority of this data is in the form of tokenized gold or money market funds.