Tokenization of real-world assets and money has the potential to completely rebuild the architecture of the global financial system. However, without common standards, this technology risks intensifying market fragmentation and triggering new systemic risks. This warning was issued by Tobias Adrian, Financial Counsellor and Director of the Monetary and Capital Markets Department at the IMF.
Speed vs. Safety: What Tokenization Actually Changes
In traditional finance, payments, stocks, and derivatives have long been digitized, but their processing still relies on centralized databases. Every transaction passes through a long, sequential chain: Execution → Clearing → Settlement → Reconciliation.
Tokenization breaks this sequence. When assets and liabilities move to shared digital ledgers, all stages can occur almost simultaneously under the management of smart contracts.
What’s the catch?
- Disappearance of time buffers: In the classical system, delays between stages give regulators and banks time to notice an error or halt a panic. In a tokenized world, this buffer disappears.
- Liquidity deficit: The need for collateral arises in real time, and the automated execution of margin calls could accelerate market crashes.
- Shift of risks: The IMF notes that risks are moving away from the balance sheets of banks and funds directly into the infrastructure—to smart contracts, platforms, and data providers.
Three Models of the Future: Who Will Become the Primary Settlement Asset?
Historically, central bank money (reserves) held by financial institutions has always been the ultimate point of settlement. In this new programmable reality, the IMF highlights three competing models:
- Tokenized bank deposits. This is familiar commercial bank fiat money converted into digital code. They remain within the existing regulatory framework but require banks to manage liquidity 24/7.
- Stablecoins. They offer global reach and easy programmability, but their stability depends directly on the issuer’s integrity and the quality of their underlying reserves.
- Tokenized central bank reserves (CBDCs). The safest option, free of credit risk, which will, however, force regulators to deeply involve themselves in managing blockchain infrastructure.
New “Blind Spots” for Regulators
“There is a danger that instead of eliminating boundaries, tokenization will create a new form of fragmentation—technical, legal, and regulatory.”
— Tobias Adrian, IMF
The IMF highlighted three main challenges for which the global financial system is not yet prepared:
- Liquidity fragmentation: If the blockchain platforms of different countries and banks are incompatible, capital will end up trapped inside isolated digital “sandboxes.”
- Code oversight: When the rules of the game are hardcoded into smart contracts, regulation must extend not just to institutions, but to the code itself. Certain algorithms could become “too big to fail”, requiring strict quality control over the software.
- Legal vacuum: There is still no global consensus on whether a blockchain entry constitutes ironclad proof of ownership, or which jurisdiction’s laws should resolve disputes.
A Blow to Emerging Markets
For emerging economies, the IMF forecasts distinct macro-financial threats. The high speed of cross-border transfers could trigger rapid capital flight from these countries during periods of market instability.
If private global stablecoins become the dominant means of payment in a local economy, states risk losing their monetary sovereignty. A country’s financial infrastructure could simply slip out of its own central bank’s direct control.
The Industry View: The Process Can No Longer Be Stopped
Despite the IMF’s stark warnings, crypto industry leaders are confident that the tokenization trend has passed the point of no return.
- Stani Kulechov (Founder of Aave): Forecasts that the real-world asset (RWA) tokenization segment could grow to $50 trillion. The primary driver will be the digitization of so-called “assets of abundance,” which were previously highly illiquid.
- Joseph Lubin (Co-founder of Ethereum, CEO of ConsenSys): States that tokenization has long moved past the experimental stage. Beginning with stablecoins, it is successfully absorbing US Treasuries and other traditional instruments, gradually transitioning the entire global economy on-chain.
