Tokenization could make finance faster, but also more susceptible to shocks, IMF says

Markets Tokenization could make finance faster, but also more susceptible to shocks, IMF says Tokenization could make finance faster and cheaper. It also makes it more vulnerable to sudden shocks, the International Monetary Fund said. By Omkar Godbole | Edited by Sheldon Reback Jul 3, 2026, 9:06 a.m. 2 min read Make preferred on Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email Make preferred on Tokenization has benefits, but it's not risk-free, IMF warns. (Shubham Dhage/Unsplash) Summary Show Tokenization represents assets like stocks, bonds and bank deposits on blockchain ledgers, enabling instant trades, ownership transfers and payment through smart contracts. It also removes the time buffers that slow the spread of shocks in traditional finance, the IMF warned. Without updated regulations, tokenization could amplify systemic risks, concentration, cybersecurity threats and volatile cross-border flows, especially in emerging economies, the financial institution said. Tokenization, the process of moving financial assets into a blockchain environment, could make markets faster and cheaper. It could also make them more vulnerable to shocks, the International Monetary Fund (IMF) warned Thursday. "Frictions disappear — but so do buffers," Tobias Adrian, the IMF's head of monetary and capital markets, wrote in a blog post . Tokenization represents financial assets, such as stocks, bonds and bank deposits, on shared digital ledgers. Smart contracts execute trades, transfer ownership and process payments much faster than in traditional finance (TradFi), where it can take days. In TradFi, a trade is executed, cleared, settled and reconciled, with each step handled by a different institution. A seller may not receive the proceeds and a buyer the shares for two days or more. For a tokenized asset, the process takes seconds. "When a tokenized asset changes hands, smart contracts can execute trades, transfer ownership, and move payments simultaneously — all on a shared ledger. Processes that once required days of clearing and reconciliation are now completed in moments," Adrian said. There are other advantages too. Tokenization enables different forms of digital money, such as tokenized bank deposits, fiat-pegged stablecoins, and tokenized central bank reserves to function seamlessly as settlement assets on the same ledger. It also allows high-quality assets to be quickly deployed across platforms as collateral. But all this is not without risk. The hidden danger The delays that tokenization eliminates aren't just inefficiencies, Adrian wrote. They also give banks, regulators and risk managers time to catch problems before they spread. Remove this buffer, and a market shock, a coding error, or a sudden wave of automated selling could ripple through the system before anyone can intervene. "Liquidity demands materialize in real time, collateral calls can be automated, and failures can propagate faster than institutions or supervisors can respond," he wrote. "Risk [sic] that once were borne by the balance sheet of individual institutions behind a transaction become increasingly concentrated in the platforms and code that govern these transactions." Adrian also flagged concentration risk. Tokenization tends to funnel activity onto fewer, larger platforms. "When infrastructure becomes the central hub," he warned, "governance failures become systemic events." On cybersecurity, he warned that consolidation onto shared ledgers "amplifies the importance of operational resilience, cybersecurity, and crisis management." Regulation hasn't caught up Perhaps the biggest concern is that the regulatory frameworks governing global finance were built for a slower world and are not keeping pace with the speed of tokenization. "Market participants must know whether tokenized records constitute definitive ownership, whether settlement finality is legally recognized, and which jurisdiction's law applies," Adrian wrote. "Without clarity, tokenization will remain fragmented and peripheral." For emerging and developing economies in particular, cross-border flows raise the risk of "volatile capital movements, rapid currency substitution, and erosion of monetary sovereignty." 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