The International Monetary Fund has warned that tokenisation’s rapid growth risks hitting a ceiling unless regulators and market‑infrastructure providers accelerate work on the legal and operational foundations needed for scale.
In analysis published alongside the October Global Financial Stability Report, the Fund says tokenised markets are expanding quickly from a small base, but remain fragmented, illiquid and vulnerable. The strongest momentum is in tokenised repo markets, where daily volumes of $300–$350bn show that collateral mobility and intraday liquidity are driving genuine adoption.
Other tokenised segments — including credit, money‑market funds and equities — add another $65bn in trading volume, but remain tiny compared with traditional markets. Retail‑driven fractional ownership is the standout feature, with 80% of tokenised equity trades executed in sizes smaller than one share.
The IMF argues that tokenisation’s long‑term significance lies in its ability to reorganise market structure. By representing assets directly on programmable ledgers, functions traditionally split across institutions — issuance, trading, settlement and servicing — can be compressed into unified workflows. Sequential processes disappear; smart contracts execute and settle automatically.
But four constraints are now slowing progress: legal certainty, regulatory clarity, interoperability, and the availability of safe settlement assets. Without enforceable rights, consistent rules, connected platforms and widely accepted on‑chain money, tokenised markets will struggle to deepen liquidity or attract institutional scale.
The Fund also warns that as tokenised markets grow, risks could amplify. Greater interconnectedness and leverage could accelerate fire‑sale dynamics and liquidity runs, while fragmentation across networks undermines price formation and weakens the network effects needed for broader adoption.
Policymakers, it says, must take a technology‑neutral approach — clarifying legal rights, ensuring consistent regulation across traditional and tokenised activities, supporting interoperability, and monitoring emerging vulnerabilities as markets expand.
Tokenisation “may yet transform finance,” the IMF concludes, but its future depends on whether regulators and infrastructure providers move quickly enough to build the trust, safeguards and market depth required for scale.
