Tokenization is rapidly expanding across global financial markets, promising to streamline trading and settlement processes. However, the International Monetary Fund (IMF) has emphasized that ongoing legal ambiguities and potential threats to financial stability could constrain broader adoption of these technologies.
IMF highlights scale and challenges of tokenized markets
The IMF released an analysis on Thursday, stating that although tokenized financial markets are witnessing rapid growth, they remain considerably smaller than their traditional counterparts. Difficulties such as poor interoperability and the absence of a widely accepted settlement asset continue to impede their expansion.
A significant gap persists between the theoretical advantages of tokenization and its current application. For instance, daily trading volumes in tokenized repurchase agreements (repos) average between $300 billion and $350 billion. By contrast, the total daily volume in the conventional US repo market stands at about $13 trillion.
In addition to repos and stablecoins, most tokenized asset value is centered in credit products and money market funds. As of July, global outstanding value of tokenized real-world assets (RWAs) totaled approximately $65 billion, a very small portion of the estimated $300 trillion in worldwide capital-market assets.
| Asset Type | Tokenized Value |
|---|---|
| Credit | $30.4 billion |
| Money Market Funds | $17.5 billion |
| Equities | $2.3 billion |
Despite limited market share, tokenized equities are attracting investors interested in 24-hour trading and the ability to hold fractional shares. The IMF observed that over half of tokenized equity trading took place outside regular US market hours, and about 80% of these trades involved less than one share.
The analysis also found that overnight movements in tokenized equity prices were often reflected in the prices of traditional stocks when markets opened. This suggests tokenized markets could offer useful price signals during off-hours trading.
The IMF reported that tokenized equities were much less liquid and experienced realized volatility that was approximately 1.5 times higher than traditional stocks. The organization cautioned that as tokenized markets connect more closely with established systems, traditional risks such as fire sales, liquidity runs, and contagion could be amplified.
To address these vulnerabilities, the IMF advocated for improved legal and regulatory frameworks, better interoperability between tokenized and traditional systems, and robust safeguards as adoption advances. Despite these challenges, the IMF pointed out that systemic risks remain constrained for now because of the relatively small scale of tokenized markets.
IMF, European regulators raise tokenization concerns
This is not the first time the IMF has issued warnings about tokenization. In November 2025, the IMF noted that automated trading and the growing use of smart contracts could intensify market volatility and increase the risk of flash crashes.
In April, it expressed concerns that rapid settlement might heighten financial stress. Another report in July underlined the dangers posed by fragmented platforms and insufficient coordination among regulators.
Comparable apprehensions have been voiced by European authorities. Last month, the European Securities and Markets Authority (ESMA) stated that expanding links between crypto assets and traditional markets, particularly through tokenized equities, could make it easier for financial shocks to spread across sectors.
IMF analysts wrote on Thursday, “Tokenization may yet transform finance, but its future will be determined less by technological possibilities than by policies that ensure market depth, trust, and sound safeguards.”
Mini dictionary: European Securities and Markets Authority (ESMA), a Paris-based agency that develops rules and directly oversees financial institutions to ensure the stability and integrity of EU financial markets.
