The International Monetary Fund (IMF) cautioned in a report published Thursday that the tokenization of financial assets could lead to financial crises spreading more rapidly than the speed at which central banks can respond. The report argued that tokenization not only reduces costs and eliminates settlement delays but also represents a fundamental transformation of the financial landscape.
Systemic risks of tokenization come into focus
In the report authored by IMF Chief Economist Tobias Adrian, tokenization was described as far more than a simple boost in efficiency. Adrian emphasized that it signals a structural shift in the financial sector. One of Adrian’s core arguments is that while conventional finance incorporates certain time lags that help absorb shocks, tokenization strips away these buffering mechanisms.
Traditionally, settlement processes in financial markets—often taking two business days—have provided central banks with a window to inject liquidity, mitigate risks, and intervene if necessary when volatility occurs. By contrast, tokenized financial systems, with their automated margin calls and algorithmic feedback loops, sharply reduce that intervention window.
The report also highlighted that central bank liquidity tools are typically designed around business day cycles. In a finance environment operating continuously around the clock and driven by automation, the effectiveness of these tools could be significantly limited.
Stablecoins and legal uncertainties spark debate
The report pointed out that stablecoins, in particular, represent a structural vulnerability. Similar to money market funds, they function well in calm conditions but could be suddenly subject to mass redemption in times of declining confidence. Even fully reserved stablecoins rely heavily on issuers’ operational capacity and the ongoing liquidity of the government bond markets backing them.
“Stablecoins without access to central bank reserves require larger liquidity buffers and prudent collateralization measures to compensate for risks in settlement assets,” the report noted.
The IMF also drew attention to the fact that tokenization undermines traditional credit evaluation processes. Because blockchain networks often ensure anonymity, assessing the creditworthiness of parties becomes more difficult, often leading to an overreliance on excessive collateral as a workaround.
Adrian highlighted that the principle of “code is law” must not override the necessity for legal certainty, especially in critical institutions. He stressed the importance of maintaining manual intervention mechanisms for emergencies within core financial infrastructure.
Questions about the legal status of tokenized assets remain unresolved. Particularly with distributed ledger technology, uncertainty persists over the applicable legal jurisdiction, the location of assets, and how creditor rights would be enforced during insolvencies.
The report outlined three potential trajectories for tokenized finance: a coordinated system anchored by central bank digital currencies, a fragmented landscape marked by incompatible national platforms, or a scenario where privately issued stablecoins take the lead and public insurance frameworks lose influence.
From a policy perspective, several key priorities were highlighted: ensuring settlements are made in safe money, providing consistent regulation across equivalent activities, establishing legal certainty for tokenized assets, developing interoperability standards between platforms, and adapting central bank tools to uninterrupted environments.
This assessment arrives as major U.S. exchanges ramp up their exploration of tokenization. In March, the New York Stock Exchange partnered with Securitize to create a platform for round-the-clock trading in tokenized securities. The NYSE’s parent company, ICE, has invested strategically in OKX, a company active in this space. Meanwhile, Nasdaq has applied to the SEC to launch tokenized equity trading, and DTCC secured approval in December for tokenizing certain assets under its custody.
A previous IMF report had reiterated that dollar-backed stablecoins could accelerate currency substitution in countries with weaker currencies. In the latest analysis, the IMF warned that developing economies may face greater risks in markets where privately issued global stablecoins become dominant.
Currently, the total value of real-world assets tokenized on blockchains stands at around $27.7 billion, while the broader stablecoin market is valued at roughly $300 billion.
