Tokenization could make trading and settlement more efficient, but legal uncertainty and financial stability risks may slow broader adoption, according to the International Monetary Fund.
In a Thursday analysis, the IMF said tokenized financial markets are growing quickly, yet remain small compared with traditional markets. It pointed to weak interoperability and the lack of widely accepted settlement assets as major barriers to expansion.
Tokenized activity is still small next to traditional finance
The IMF said the gap between tokenization’s potential and its current scale is visible in market activity. Tokenized repurchase agreements, or repos, account for most tokenized trading, with daily transaction volume averaging $300 billion to $350 billion. The broader US repo market, by comparison, handles roughly $13 trillion a day.
Outside repos and stablecoins, outstanding tokenized asset value is concentrated in credit products and money market funds. As of July, tokenized real-world assets, or RWAs, stood at about $65 billion in outstanding value, only a small share of the roughly $300 trillion in global capital-market assets.
Within that total, tokenized credit amounted to $30.4 billion, money market funds reached $17.5 billion, and tokenized equities represented about $2.3 billion.
Investors are using tokenized equities for round-the-clock trading
Despite the market’s limited size, tokenized equities are drawing investors looking for 24/7 trading and fractional ownership. The IMF found that more than half of tokenized equity trading took place outside regular US market hours, while about 80% of trades involved less than one share.
The fund also said overnight price moves in tokenized equities appeared in traditional stock prices shortly after the market opened, suggesting tokenized venues may offer price signals outside normal trading hours.
That said, the IMF found tokenized equities were significantly less liquid than their traditional counterparts and posted realized volatility at roughly 1.5 times the level seen in conventional equity markets. It warned that as tokenized markets expand, stronger interconnectedness and leverage could magnify familiar financial risks, including fire sales, liquidity runs and contagion.
The IMF called for clearer legal and regulatory frameworks, better interoperability between tokenized markets and traditional financial systems, and safeguards to address new vulnerabilities as adoption grows. For now, the report said systemic risks remain limited because adoption is still relatively small.
IMF and European regulators have raised similar warnings before
This is not the first time the IMF has flagged risks tied to tokenization. In November 2025, it warned that automated trading and interconnected smart contracts could intensify market volatility and flash crashes.
In April, the fund said faster settlement could speed up financial stress. A separate July analysis highlighted systemic risks linked to fragmented platforms and weak regulatory coordination.
European regulators have voiced similar concerns. Last month, the European Securities and Markets Authority, or ESMA, said growing links between crypto and traditional finance, including through tokenized equities, could raise the risk that financial shocks spread across markets.
The IMF authors wrote in Thursday’s blog post: "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."