Tokenization could make finance faster, but also more susceptible to shocks, IMF says
Key takeaways
- It could also make them more vulnerable to shocks, the International Monetary Fund (IMF) warned Thursday.
- "Frictions disappear — but so do buffers," Tobias Adrian, the IMF's head of monetary and capital markets, wrote in a blog post.
- Tokenization represents financial assets, such as stocks, bonds and bank deposits, on shared digital ledgers.
Without updated regulations, tokenization could amplify systemic risks, concentration, cybersecurity threats and volatile cross-border flows, especially in emerging economies, the financial institution said.Tokenization, the process of moving financial assets into a blockchain environment, could make markets faster and cheaper. It could also make them more vulnerable to shocks, the International Monetary Fund (IMF) warned Thursday.
"Frictions disappear — but so do buffers," Tobias Adrian, the IMF's head of monetary and capital markets, wrote in a blog post.
Tokenization represents financial assets, such as stocks, bonds and bank deposits, on shared digital ledgers. Smart contracts execute trades, transfer ownership and process payments much faster than in traditional finance (TradFi), where it can take days.