The International Monetary Fund has warned that tokenised finance could make the global financial system more efficient and resilient or introduce new vulnerabilities, depending on how regulators respond.
More Than A Technological Upgrade
Tokenisation is often presented as a faster and cheaper way to move money and assets. The IMF argues its impact could be far broader. By moving financial assets and liabilities onto shared digital ledgers, tokenisation could reshape market structures, redistribute risk and require regulators to rethink how financial systems are supervised.
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In traditional markets, execution, clearing and settlement take place sequentially through multiple intermediaries. Tokenised systems can combine those functions into a single software-driven process, allowing transactions to be executed, transferred and settled almost simultaneously.
While that could improve efficiency, it would also shift where risk is concentrated. Instead of remaining primarily with banks, brokers and investment funds, risk could increasingly move to the digital platforms and infrastructure providers operating tokenised markets.
Speed Brings Efficiency And Exposure
Faster settlement, lower transaction costs and programmable assets are among tokenisation’s key advantages. However, the IMF warns that the same features could remove safeguards built into the current financial system.
Delays in settlement, reconciliation and liquidity management create costs, but they also give financial institutions time to detect errors, absorb shocks and respond during periods of market stress. Tokenised finance compresses those timelines.
As a result, liquidity pressures could emerge immediately, collateral calls could be triggered automatically, and disruptions could spread more quickly than firms or regulators can respond. Markets may become more efficient, but also more continuous, more automated and potentially less resilient during periods of stress.
The Battle Over Settlement Assets
One of the IMF’s main concerns is the future of settlement assets, the money used to complete financial transactions. While central bank money remains the safest settlement asset, tokenisation introduces several digital alternatives.
Tokenised bank deposits would largely fit within existing regulatory frameworks and could improve liquidity management through programmable, simultaneous settlement. However, continuous settlement would leave banks with less time to respond to unexpected disruptions, increasing the need for real-time liquidity support.
Stablecoins offer programmability and global reach, but their reliability depends on the quality of their reserves and the resilience of their issuers. Even fully backed stablecoins have come under pressure during periods of market stress.
Tokenised central bank reserves would eliminate credit risk from the settlement asset itself, but would also require central banks to operate or oversee new programmable infrastructure, expanding their role beyond traditional payment systems.
Banks Will Not Disappear, But Their Role Will Change
The IMF expects tokenisation to reshape rather than replace banks. Tokenised deposits could combine payments, settlement and treasury operations on shared ledgers, while tokenised lending could automate interest calculations, collateral management and risk controls through smart contracts.
In capital markets, tokenised securities could integrate issuance, trading, settlement, custody and compliance into a single workflow, reducing counterparty risk and speeding up processing. However, automated margin calls and redemption mechanisms could amplify stress during periods of market disruption.
Concentration Creates A New Systemic Risk
Shared permissioned ledgers could reduce fragmentation by consolidating activity on fewer platforms, making operational resilience, cybersecurity and governance increasingly important.
If digital infrastructure becomes central to market activity, operational failures could become systemic risks. The IMF also stresses that interoperability between platforms will be critical to prevent liquidity from becoming trapped across separate systems.
Regulation Must Move Into The Code
The IMF says tokenisation will require regulators to oversee not only financial institutions but also the software executing transactions. Smart contracts could become critical market infrastructure, increasing the need for transparency, governance and oversight.
Legal certainty will also be essential. Market participants must know whether tokenised records represent legal ownership, when settlement becomes final and which jurisdiction applies to cross-border transactions.
Why Emerging Markets Face A Bigger Trade-Off
For emerging and developing economies, tokenisation could improve cross-border payments, broaden market access and modernise settlement systems.
However, faster-moving tokenised assets could also accelerate capital flight, currency substitution and pressure on monetary sovereignty, particularly if privately issued global stablecoins become widely used for payments. The IMF says domestic regulation should remain the first line of defence, supported by international coordination.
The Policy Choices Will Determine The Outcome
The IMF says tokenisation is neither inherently beneficial nor inherently risky. Its impact will depend on the regulatory, legal and operational frameworks governing it.
According to the fund, the most resilient model combines private-sector innovation with risk-free settlement assets, clear legal frameworks and internationally coordinated oversight.
