The International Monetary Fund warned policymakers that tokenisation could reshape the financial system and shift risk away from banks toward technology platforms.
Tokenisation’s impact on market structure
Tokenisation promises faster settlement, cheaper payments and the ability to embed programmable assets in transactions. The fund acknowledges these benefits but stresses that the underlying architecture of securities markets will change. Centralised databases and the sequential processes that have supported trading for decades could be replaced by distributed ledgers, removing many of the friction points that currently slow transactions.
That removal also eliminates several buffers that have traditionally absorbed shocks. “Liquidity demands materialise in real time, collateral calls can be automated, and failures can propagate faster than institutions or supervisors can respond,” the IMF notes. When risk that once rested on the balance sheets of individual institutions moves onto the platforms and code that execute trades, the system’s built‑in safeguards are weakened.
Policy choices made now will determine whether tokenisation strengthens or fragments the financial system. The document points out that banks and other intermediaries will not disappear, but their roles in funding, liquidity management and risk bearing will evolve.
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Regulatory challenges and legal certainty
One core concern is the need for clear legal frameworks. Market participants must know whether tokenised records constitute definitive ownership, whether settlement finality is legally recognised, and which jurisdiction’s law applies. Without such certainty, the fund warns that tokenisation could remain “fragmented and peripheral.”
Oversight will also have to extend beyond traditional institutions to the code itself. As smart contracts embed transaction rules directly into software, regulators will need tools to monitor and enforce compliance at the code level. They highlight the importance of code governance, liquidity backstops and the interplay between public and private money in this new environment.
Interoperability between different blockchain frameworks is another important issue. The IMF suggests that the ideal outcome would combine public‑good elements—such as risk‑free settlement assets and internationally aligned oversight—with features that promote interoperability and innovation.
What this means for policymakers
Policymakers face a set of trade‑offs. Tokenisation could deliver efficiencies that lower costs for investors and improve market accessibility. The shift of risk to technology platforms raises questions about systemic resilience. The paper urges regulators to act quickly, shaping the emerging architecture before it solidifies into a fragmented mosaic of competing standards.
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Risk moves to code.
In practice, this may involve updating existing financial regulations to account for real‑time liquidity demands and automated collateral calls. It could also require new supervisory tools that can assess the safety of the underlying code, something that traditional audit processes are not equipped to handle.
The IMF stresses that the direction of tokenisation will hinge on how well regulators can provide legal certainty, ensure interoperability, and maintain robust risk controls. The fund concludes that a coordinated approach, balancing public oversight with the flexibility needed for technological advancement, will be essential to avoid a fragmented financial setting.
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