IMF warns tokenisation could reshape global financial system

The International Monetary Fund has warned that the tokenisation of financial assets and liabilities is no longer just a payments-technology upgrade, but a structural shift that could reshape the global financial system, altering how markets settle transactions, manage liquidity and absorb risk.

Tobias Adrian, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department, said tokenisation could change the architecture of finance by moving assets and liabilities onto shared digital ledgers, where transactions can be executed automatically through smart contracts. The IMF has described tokenisation as a structural shift in financial architecture rather than a marginal efficiency gain.

Tokenisation refers to the process of turning financial assets or liabilities — such as deposits, securities or other claims — into digital tokens recorded on a programmable ledger. This allows ownership, transfer and settlement to be embedded in the asset itself, rather than handled through separate layers of institutions and databases.

From faster payments to a new financial architecture

Adrian said payment systems, securities and derivatives have been digital for decades, but still rely heavily on centralised databases and sequential processes covering trading, clearing and settlement.

Although these processes can take longer, they also provide buffers that help the financial system manage risk, liquidity and errors during periods of stress.

However, once assets are tokenised and recorded on shared digital ledgers, trading, transfer of ownership and payment can take place almost simultaneously. Processes that previously took several days could be completed in moments, according to the IMF.

Efficiency gains come with new risks

The IMF said tokenisation could make financial markets faster, cheaper and more efficient, but warned that removing traditional layers of friction could also remove safeguards that help absorb shocks.

In a tokenised financial system, liquidity needs could arise in real time, while margin calls and collateral requirements could be triggered automatically through smart contracts.

Adrian warned that if errors or stress occur, losses could spread more quickly than in the traditional system. Risks that were once held on the balance sheets of banks, funds or financial institutions could shift towards digital platforms, market infrastructure providers and the software code controlling transactions.

Three forms of digital money compete for settlement role

The rise of tokenisation is also reopening a key question for the future of finance: what type of asset should be used to settle transactions.

The IMF identified three emerging forms of digital money: tokenised bank deposits, stablecoins and tokenised central bank reserves.

Tokenised bank deposits would remain within the regulatory framework of commercial banks, while stablecoins could offer global reach and easier cross-border use, but depend heavily on confidence in the quality and liquidity of their reserve assets. Tokenised central bank reserves could reduce credit risk, but would require central banks to play a larger role in operating or overseeing digital settlement infrastructure.

Banks will change, not disappear

Adrian said tokenisation would not eliminate banks, but would change how they operate.

Banks could see major changes in funding, liquidity management and lending, with key conditions such as interest calculations, collateral triggers and risk controls written directly into smart contracts.

In capital markets, tokenisation could combine securities issuance, trading, settlement, custody and regulatory compliance into a single process. This could reduce costs and counterparty risk, but it could also create continuous liquidity demands and intensify market volatility during periods of stress.

Emerging economies face both benefits and risks

The IMF said developing and emerging economies could benefit from faster cross-border payments, lower transaction costs and more efficient access to financial markets.

However, the rapid movement of capital and digital assets could also increase volatility in capital flows, encourage greater use of foreign currencies in place of local currencies and weaken the effectiveness of monetary policy.

These risks could become more serious if privately issued stablecoins gain widespread use in economies with volatile currencies, high inflation or weak financial institutions.

Policy decisions will shape the outcome

The IMF said the future of tokenised finance would depend heavily on decisions made by policymakers today.

Key issues include the role of public and private money, interoperability between digital platforms, legal certainty, oversight of smart contracts, governance of financial code and the creation of liquidity-support mechanisms.

Adrian said tokenisation could improve the efficiency of the global financial system, but only if it is supported by safe settlement assets, clear regulation and internationally consistent standards aimed at preserving long-term financial stability.

Source: IMF, Thansettakij