Policy decisions on money, regulation, and market structure will decide whether tokenization strengthens global finance or creates new sources of disruption, IMF Monetary and Capital Markets Director Tobias Adrian said in a report examining the shift of financial assets onto shared digital ledgers.
Adrian said tokenization could make markets faster, more efficient, and easier to access by combining execution, clearing, and settlement into one software-driven process. But he warned that the same change could move risks away from familiar banking and market intermediaries and into technology platforms, smart contracts, cybersecurity systems, and governance arrangements that may not yet be ready to support systemically important financial activity.
The central issue, according to Adrian, is not whether tokenization will develop, but how public policy will shape it. As deposits, securities, collateral, and payment instruments move onto digital ledgers, regulators and central banks will need to decide what kinds of money can be used for settlement, how tokenized markets should be supervised, and how legal systems will define ownership, finality, and responsibility when transactions are executed by code.
The IMF analysis presents tokenization as a major redesign of financial infrastructure rather than a narrow technological upgrade. In traditional markets, a transaction usually moves through separate stages: trading, confirmation, clearing, settlement, and custody. Tokenization can compress those steps into a single transaction on a shared ledger, potentially reducing delays and counterparty exposure. But it can also remove buffers that currently give banks, brokers, custodians, and clearing houses time to manage liquidity, correct errors, and absorb stress.
That trade-off is at the center of Adrian’s warning. Faster markets can reduce some risks, but they can also make shocks spread more quickly. Instant settlement may lower the chance that one party fails before a trade is completed, yet it can increase pressure on cash and collateral because obligations must be met immediately, including outside traditional trading hours.
Tokenization shifts risk to digital infrastructure
Adrian wrote that tokenization changes where financial risk sits. Instead of relying mainly on bank balance sheets, central securities depositories, clearing houses, and other conventional intermediaries, tokenized finance depends heavily on the reliability of digital platforms and the rules written into software.
That shift matters because software-driven markets can automate processes that were once handled manually or through institutional judgment. Smart contracts can release collateral, move cash, settle securities, or trigger margin calls without waiting for human approval. This can reduce operational friction, but it also means errors in code, flawed governance, cyberattacks, or platform outages could have direct financial consequences.
The IMF report said tokenization could improve market operations if strong frameworks are in place. Shared ledgers can make asset ownership easier to verify, reduce reconciliation costs, and allow market users to move collateral more efficiently. But if major platforms are poorly governed, fragmented, or vulnerable to cyber incidents, tokenization could create new points of systemic weakness.
Permissioned ledgers may play an important role in this transition. These systems restrict participation to approved users and can be designed to meet regulatory, compliance, and operational standards. By concentrating activity on fewer platforms, they may improve liquidity efficiency and reduce duplication across market infrastructure. Yet this concentration also raises the stakes. If a dominant permissioned platform fails, suffers a cyber breach, or faces a governance dispute, the effects could extend across many institutions and markets at once.
For traders, this means risk analysis may need to expand beyond price, credit quality, and counterparty strength. The resilience of the platform, the clarity of its governance, the legal status of its tokens, and the reliability of its smart contracts could become core market considerations.
Three settlement assets are emerging
The IMF report identifies three main types of settlement assets that are likely to shape tokenized finance: tokenized bank deposits, stablecoins, and tokenized central bank reserves. Each model offers different benefits and risks, and each would place different demands on regulators, central banks, commercial banks, and technology providers.
Tokenized bank deposits would keep money largely inside the regulated banking system. In this model, commercial bank deposits are represented on shared ledgers and can be used for atomic settlement, where the transfer of an asset and the payment for it happen at the same time. This could preserve the familiar role of banks while making transactions faster and more programmable.
But tokenized deposits would also require banks to manage liquidity in real time. In current systems, settlement cycles and business-day schedules give institutions time to arrange funding and manage payment flows. In a tokenized environment that operates continuously, banks may need access to liquidity support at any time, including nights, weekends, and holidays. That could require central banks and payment systems to rethink how backstops are provided.
Stablecoins are another possible settlement asset, especially for markets that operate across borders or outside traditional banking hours. Stablecoins are designed to maintain a fixed value, often against the US dollar, and have already become widely used in cryptocurrency markets. By late June 2026, the stablecoin market had surpassed $316 billion in total capitalization, with dollar-backed coins accounting for roughly 97% of the total.
Their appeal lies in speed, global reach, and 24/7 availability. But Adrian’s analysis stresses that stablecoins are only as strong as their reserves, market liquidity, and issuers. If a stablecoin issuer holds weak or illiquid assets, faces operational problems, or loses market confidence, the token may fail to maintain its peg. That risk becomes more serious if stablecoins are used not only in crypto trading but also in broader securities, payments, or collateral markets.
Tokenized central bank reserves represent the safest settlement asset from a credit-risk perspective because they are claims on the central bank rather than private issuers. Settlement in central bank money already plays a critical role in wholesale financial markets. Tokenizing reserves could bring that safety into programmable markets and reduce reliance on private settlement assets.
However, this model would also extend central bank responsibilities into new territory. Central banks may need to oversee or operate programmable settlement systems that run continuously and interact with smart contracts, tokenized securities, and private platforms. That would be a major operational and supervisory expansion. Globally, 134 countries have explored central bank digital currencies in some form, but most projects remain in research or pilot stages. The United States has also explicitly barred a retail central bank digital currency for now, though wholesale settlement innovation remains a separate policy question.
Banks are likely to change, not disappear
Adrian said tokenization is more likely to transform banking functions than eliminate banks. Deposits on shared ledgers could combine payment, settlement, and treasury operations into one programmable environment. Instead of separate systems for moving money, recording ownership, and managing liquidity, banks could operate on platforms where these functions are linked.
This could make treasury management more efficient. Corporate clients, financial institutions, and trading firms may be able to move funds and collateral instantly across tokenized platforms. The same infrastructure could support automated cash sweeps, real-time settlement, and more dynamic collateral management.
Lending could also change. Smart contracts may embed collateral requirements, repayment terms, risk triggers, and enforcement mechanisms directly into transactions. For example, a tokenized loan could automatically adjust collateral requirements when market prices move, or restrict the transfer of pledged assets until obligations are met. That could reduce manual processing and improve transparency, but it could also make stress events more mechanical.
If many contracts demand collateral at the same time, liquidity pressure could intensify quickly. In traditional markets, margin calls and settlement obligations often follow established schedules. In tokenized markets, automated systems can act immediately. That may reduce discretion and operational delay, but it can also accelerate forced sales or liquidity shortages if risk controls are not carefully designed.
Banks may therefore remain central, but their balance sheets, payment services, custody roles, and liquidity operations could be reorganized around programmable ledgers. Their value may depend less on processing capacity and more on trust, regulatory standing, liquidity provision, client access, and risk management.
Capital markets could become faster and more demanding
In capital markets, tokenization could integrate issuance, trading, settlement, and custody into a unified structure. A security could be issued directly on a digital ledger, traded on the same or connected platforms, settled instantly, and held in tokenized form without the same reconciliation processes required today.
This could reduce counterparty exposure because the transfer of securities and cash can occur simultaneously. It could also reduce settlement failures and make ownership records more transparent. For asset classes with complex post-trade processes, tokenization may lower administrative costs and shorten settlement timelines from days to moments.
Collateralized markets may benefit early. High-quality assets such as government bonds, money market fund shares, or other liquid securities could become easier to mobilize across platforms. Traders could pledge, release, or reuse collateral more quickly, potentially improving liquidity efficiency. Tokenized US Treasuries have already become one of the most visible examples of this trend, reaching a record $15.35 billion in May 2026.
Still, the broader real-world asset tokenization market remains early. Estimates for on-chain tokenized real-world asset value in mid-2026 range from about $26.7 billion to $60 billion, depending on methodology and included categories. That is meaningful growth, but still small compared with global bond, equity, and real estate markets.
Recent analysis also suggests that some tokenized assets show little trading or transfer activity after issuance. A large portion has recorded zero weekly transfer volume, indicating that infrastructure may be developing faster than day-to-day market use. This gap matters because the success of tokenization depends not only on issuing digital representations of assets, but also on creating deep, liquid, legally reliable markets around them.
Instant settlement creates new liquidity challenges
The move toward instantaneous settlement could challenge financial systems built around business-day cycles. Today’s markets rely on time buffers. Settlement windows, end-of-day processes, central bank operating hours, and clearing mechanisms all give institutions time to fund obligations and manage risks.
Tokenized markets may operate continuously. That creates the possibility of faster, more efficient settlement, but it also means liquidity needs can arise at any moment. If a firm must meet a margin call, settle a trade, or deliver collateral instantly, it cannot depend on traditional market opening hours or delayed settlement cycles.
Adrian said future liquidity backstops may need to function natively inside tokenized networks. That could mean central bank facilities, commercial bank liquidity tools, or private liquidity arrangements that operate continuously and connect directly to digital settlement platforms.
The challenge is not only technical. Policymakers must decide who can access these backstops, what assets qualify as collateral, how risk is priced, and how emergency support can be provided without weakening market discipline. In tokenized markets, slow emergency responses may be less effective because stress can move at the speed of automated execution.
Regulation must follow the transaction, not only the institution
The IMF report said oversight may need to expand from supervising entities to supervising the digital processes that execute financial activity. In traditional finance, regulation often focuses on institutions such as banks, brokers, exchanges, custodians, and clearing houses. In tokenized finance, key decisions may be embedded in smart contracts and platform protocols.
That does not mean institutions become irrelevant. But it does mean regulators may need to understand and oversee code, governance rights, operational dependencies, and platform design. A smart contract that controls collateral liquidation, settlement finality, or asset transfer restrictions can have the same practical importance as a market rulebook.
Legal clarity will be critical. Tokenized markets must establish whether a ledger entry represents definitive ownership of an asset, which jurisdiction’s law applies, when settlement becomes final, and what happens if a transaction is disputed or executed incorrectly. Without clear answers, traders may hesitate to rely on tokenized assets for large-scale financial activity.
Cross-border consistency is also essential. Tokenized assets can move across platforms and jurisdictions more easily than traditional assets. If one country treats a token as a security, another treats it as a payment instrument, and a third does not recognize its legal status, disputes could become difficult to resolve. Fragmented regulation could also trap liquidity inside national or platform-specific silos.
Major regulatory frameworks are beginning to address some of these issues. In the European Union, the Markets in Crypto-Assets regulation, known as MiCA, has created a broad framework for cryptoasset issuers and service providers, with transition periods ending by July 2026. In the United Kingdom, a comprehensive cryptoasset regime is expected to be finalized during 2026. In the United States, the GENIUS Act is being implemented to establish clearer rules for stablecoin issuers.
These frameworks may help define the next phase of tokenized finance. But Adrian’s analysis suggests that regulation will need to keep adapting as tokenized assets become more closely linked with banking, securities markets, and payment systems.
Developing economies face opportunity and risk
For developing economies, tokenization could lower remittance costs, improve access to capital markets, and support more efficient cross-border payments. The IMF noted that sending a $200 remittance still costs an average of about 6.4% globally. If tokenized payment networks can reduce intermediaries and settlement delays, they could make cross-border transfers cheaper and faster.
Tokenized securities could also expand access to financial markets by allowing smaller denominations, faster settlement, and broader distribution. Governments and companies in emerging markets may eventually be able to reach new pools of capital through regulated tokenized platforms.
But the risks are significant. The growing use of privately issued global stablecoins could accelerate currency substitution, especially in economies with high inflation, weak banking systems, or limited trust in domestic money. If households and businesses increasingly use dollar-backed stablecoins instead of local currency, central banks may lose influence over domestic monetary conditions.
That could weaken monetary policy transmission, reduce demand for local bank deposits, and increase vulnerability to external shocks. For that reason, the IMF said strong domestic policy frameworks and international coordination will be necessary. Countries will need to balance innovation with safeguards for monetary sovereignty, financial stability, and consumer protection.
Adrian’s broader message is that tokenization is not automatically good or bad for the global financial system. Its impact will depend on choices made now by central banks, finance ministries, regulators, market infrastructure providers, and private firms. If legal, regulatory, liquidity, and operational frameworks are strong, tokenization could make markets faster, safer, and more inclusive. If they are weak, the technology could amplify shocks, concentrate risk, and create vulnerabilities that are harder to control.
For traders, the next phase of tokenization will be defined less by the novelty of the technology and more by the quality of the rules around it. The winners are likely to be platforms and institutions that can combine speed with trust, automation with accountability, and global reach with regulatory clarity.
Explore how tokenized equities mirror these tokenization trends, reshaping market access, settlement speed, and cross-border capital flows.
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