IMF warns tokenized markets could amplify financial risks

Tokenization could reshape financial markets by making trading and settlement more efficient, but legal uncertainty and risks to financial stability could hinder wider adoption, according to the International Monetary Fund (IMF).

In a Thursday analysis, the IMF said tokenized financial markets are growing rapidly but remain small compared with traditional markets, with poor interoperability and a lack of widely accepted settlement assets among the key obstacles to expansion.

The gap between tokenization’s potential and its current scale is evident in trading activity. Tokenized repurchase agreements, or repos, dominate tokenized trading activity, averaging $300 billion to $350 billion in daily transaction volume, compared with roughly $13 trillion traded daily in the broader US repo market.

Beyond repos and stablecoins, outstanding tokenized asset value is concentrated in credit products and money market funds. Tokenized real-world assets (RWAs) reached approximately $65 billion in outstanding value as of July, a small fraction of the roughly $300 trillion in global capital-market assets. Tokenized credit accounted for $30.4 billion, followed by money market funds at $17.5 billion, while tokenized equities represented about $2.3 billion.