Tokenization, the representation of real-life assets on a blockchain, could reshape both crypto markets and traditional finance, while introducing new risks that regulators are not yet prepared to manage, according to the International Monetary Fund (IMF).
In a new report, the IMF described tokenization as more than just a technical improvement of markets. By moving assets such as money, bonds and funds to shared blockchains, transactions can be settled instantly, eliminating intermediaries and reducing the delays that define today’s markets.
The IMF says the “atomic agreement” that tokenization brings to the financial world could reduce counterparty risk and force companies to manage liquidity in real time.
“Stressful events are likely to unfold more quickly, leaving less time for discretionary intervention,” the report reads. “Ensuring stability therefore requires that tokenized asset management remain anchored in secure settlement assets, legally recognized finality, and strong governance arrangements.”
The report points to stablecoins (tokens whose value is pegged to a fiat currency) as a key bridge between cryptocurrencies and traditional finance. These could become widely used settlement assets on tokenized platforms, according to the report.
Still, their reliability depends on reserves and rescue systems, leaving them exposed to runs under pressure.
The IMF also warned that faster, more automated markets could amplify volatility, while smart contracts that trigger margin calls or liquidations can accelerate liquidations during downturns. Such rapid declines have been observed in the crypto markets,
Tokenized assets can also move instantly between jurisdictions, complicating supervision and raising concerns about capital flight and currency substitution in emerging markets, the IMF wrote.
The organization called for clearer legal frameworks and stronger global coordination, arguing that without them, token finance could deepen fragmentation rather than improve efficiency.
Tokenization has been a growing topic in the cryptocurrency sector. Real-world assets added to blockchain rails have already surpassed $23.2 billion according to data from DeFiLlama. Excluding stablecoins, most of that figure is in the form of tokenized gold or money market funds.
