Tokenization could reshape financial markets by making trading and settlement more efficient, but legal uncertainty and risks to financial stability could hinder wider adoption, according to the International Monetary Fund (IMF).
In a Thursday analysis, the IMF said tokenized financial markets are growing rapidly but remain small compared with traditional markets, with poor interoperability and a lack of widely accepted settlement assets among the key obstacles to expansion.
The gap between tokenization’s potential and its current scale is evident in trading activity. Tokenized repurchase agreements, or repos, dominate tokenized trading activity, averaging $300 billion to $350 billion in daily transaction volume, compared with roughly $13 trillion traded daily in the broader US repo market.
Beyond repos and stablecoins, outstanding tokenized asset value is concentrated in credit products and money market funds. Tokenized real-world assets (RWAs) reached approximately $65 billion in outstanding value as of July, a small fraction of the roughly $300 trillion in global capital-market assets. Tokenized credit accounted for $30.4 billion, followed by money market funds at $17.5 billion, while tokenized equities represented about $2.3 billion.
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Investors embrace 24/7 trading as risks persist
Despite their limited scale, tokenized equities are attracting investors seeking around-the-clock trading and fractional ownership. The IMF found that more than half of tokenized equity trading occurred outside regular US market hours, while roughly 80% of trades involved less than one share.
The IMF also found that overnight price movements in tokenized equities appeared in traditional stock prices shortly after markets opened, suggesting tokenized markets could provide useful price signals outside regular trading hours.
Tokenized equity trading volumes by trading hours and exchange type. Source: IMF
However, the IMF said that tokenized equities were significantly less liquid and exhibited roughly 1.5 times the realized volatility of their traditional counterparts. It warned that as tokenized markets grow, greater interconnectedness and leverage could amplify traditional financial risks, including fire sales, liquidity runs and contagion.
The IMF called for clearer legal and regulatory frameworks, greater interoperability between tokenized and traditional financial systems, and safeguards to address emerging vulnerabilities as adoption expands. For now, however, the report noted that systemic risks currently remain limited because adoption is still relatively small.
IMF, European regulators raise tokenization concerns
This is not the first time the IMF has raised concerns about tokenization. In November 2025, it warned that automated trading and interconnected smart contracts could amplify market volatility and flash crashes.
In April, it cautioned that faster settlement could accelerate financial stress, while a July analysis highlighted systemic risks from fragmented platforms and insufficient regulatory coordination.
European regulators have raised similar concerns. Last month, the European Securities and Markets Authority (ESMA) warned that growing links between crypto and traditional finance, including through tokenized equities, could increase the risk of financial shocks spreading across markets.
“Tokenization may yet transform finance, but its future will be determined less by technological possibilities than by policies that ensure market depth, trust, and sound safeguards,” the IMF authors concluded in Thursday’s blog post.
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