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 equipped to manage, according to the International Monetary Fund (IMF).
In a new report, the IMF described tokenization as more than a technical upgrade to markets. By moving assets like money, bonds and funds onto shared blockchains, transactions can settle instantly, cutting out intermediaries and reducing delays that define today’s markets.
The IMF says the “atomic settlement” that tokenization brings to the financial world could lower counterparty risk and force firms to manage liquidity in real time.
“Stress events are likely to unfold faster, leaving less time for discretionary intervention,” the report reads. “Therefore, ensuring stability requires that tokenized asset management remains anchored in safe settlement assets, legally recognized finality, and robust governance arrangements.”
The report points to stablecoins — tokens whose value is pegged to a fiat currency — as a key bridge between crypto and traditional finance. These could become widely used settlement assets across tokenized platforms, the report said.
Still, their reliability depends on reserves and redemption systems, leaving them exposed to runs under stress.
The IMF also warned that faster, automated markets could amplify volatility, while smart contracts that trigger margin calls or liquidations may accelerate selloffs during downturns. Such rapid declines have been seen in crypto markets,
Tokenized assets also can move instantly across jurisdictions, complicating oversight 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, tokenized finance could deepen fragmentation rather than improve efficiency.
Tokenization has been a growing theme in the crypto sector. Real-world assets added to blockchain rails have already topped $23.2 billion according to DeFiLlama data. Excluding stablecoins, the majority of that figure is in the form of tokenized gold or money market funds.