The International Monetary Fund (IMF) has raised concerns about the expansion of tokenized financial markets, warning that legal uncertainty and interconnectedness could amplify financial risks even as the sector grows rapidly.
In an analysis, the IMF acknowledged that tokenization could make trading and settlement more efficient, but noted that the sector remains small relative to traditional markets. Key obstacles to wider adoption include poor interoperability between systems and a lack of widely accepted settlement assets.
Limited Scale Despite Growth
Tokenized repurchase agreements dominate tokenized trading activity, averaging $300 billion to $350 billion in daily transaction volume, significantly below the roughly $13 trillion traded daily in the broader US repo market.
Tokenized real-world assets 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.
Volatility and Liquidity Concerns
Despite their limited scale, tokenized equities are attracting investors seeking around-the-clock trading and fractional ownership. The IMF found that more than half of tokenized equity trading occurred outside regular US market hours, with roughly 80% of trades involving less than one share.
However, the IMF identified significant risks. Tokenized equities were substantially less liquid and exhibited roughly 1.5 times the realized volatility of their traditional counterparts. The fund warned that as tokenized markets grow, greater interconnectedness and leverage could amplify traditional financial risks, including fire sales, liquidity runs, and contagion.
Regulatory Recommendations
The IMF called for clearer legal and regulatory frameworks, greater interoperability between tokenized and traditional financial systems, and safeguards to address emerging vulnerabilities. The fund noted that systemic risks currently remain limited because adoption is still relatively small.
The European Securities and Markets Authority has raised similar concerns, warning that growing links between crypto and traditional finance could increase the risk of financial shocks spreading across markets.
The IMF concluded that tokenization's future will depend less on technological possibilities than on policies that ensure market depth, trust, and sound safeguards.
