Tokenization—the conversion of real-world assets into blockchain-based representations—is set to redefine financial markets, but it could also create risks that regulators are not yet fully prepared to address, the International Monetary Fund (IMF) said in a new report.
The IMF views tokenization as a fundamental shift in market structure. By moving assets such as cash, bonds, and funds onto shared blockchain infrastructure, transactions can be completed almost instantly, removing intermediaries and reducing the inefficiencies of traditional settlement systems.
This transformation is driven by “atomic settlement,” where transactions are executed and finalized at the same time. While this reduces counterparty risk, it also forces financial institutions to manage liquidity continuously, rather than relying on delayed settlement cycles.
However, the same speed and automation that improve efficiency could also increase fragility. The IMF warns that during periods of market stress, disruptions may unfold much faster, leaving little room for human intervention. Maintaining stability will require trusted settlement assets, clear legal finality, and strong governance frameworks.
Stablecoins are expected to play a central role in this new system. As digital tokens pegged to fiat currencies, they could become widely used for settlement across tokenized platforms. Still, their effectiveness depends on the strength of their reserves and redemption processes, making them vulnerable to runs in times of crisis.
The report also flags the risk of heightened volatility. Automated smart contracts that trigger margin calls or liquidations could accelerate downturns, amplifying price swings—a pattern already seen in crypto markets.
In addition, the borderless nature of tokenized assets complicates regulation. Assets can move instantly across jurisdictions, raising concerns about oversight, capital flight, and currency substitution, particularly in emerging economies.
To mitigate these risks, the IMF calls for clearer legal frameworks and stronger international coordination. Without a unified approach, tokenization could increase fragmentation across financial systems rather than deliver its promised efficiencies.
Despite these challenges, adoption continues to grow. According to DeFiLlama, tokenized real-world assets have surpassed $23.2 billion. Excluding stablecoins, most of this value is concentrated in tokenized gold and money market funds, highlighting rising demand for blockchain-based financial products.
