IMF says tokenization could fracture finance without clear rules

The International Monetary Fund said tokenization will either strengthen or fragment the global financial system. Which one depends on the rules governments set now, Tobias Adrian, the IMF's financial counselor, wrote in a July 2 blog post.

Tokenization moves assets and liabilities onto shared digital ledgers. Execution and settlement can happen at the same time, cutting delays from separate clearing systems and manual checks. Adrian said the change goes beyond faster payments.

That speed carries costs. Traditional markets use the gap between trade and settlement to catch errors or respond to stress. Tokenized markets run on smart contracts that move payments and collateral within moments. Ownership updates happen at the same time. The old buffers vanish.

Automated margin calls and instant redemptions can create liquidity demands faster than firms can meet them. Adrian warned that risk shifts away from bank balance sheets toward the platforms and the code that run the system. Those entities do not carry the same capital buffers that banks hold.

The warning arrives as large financial firms push tokenization into regulated markets. Major U.S. banks back a tokenized deposit network through the Clearing House, with a launch target of the first half of 2027, crypto.news reported. The system would settle tokenized deposits around the clock while keeping deposits inside the banking sector.

Tokenization is also entering securities. Securitize tokenized its own NYSE-listed shares on Solana and Avalanche the day public trading began. Ondo Finance brought BlackRock's IVV ETF and Micron shares onto Ethereum using a model that holds the underlying securities inside regulated U.S. custody.

The IMF said tokenized finance needs clear rules for settlement assets and platform governance. Interoperability standards and central bank roles are unresolved. Investors must know whether tokenized records prove ownership and whether settlement is final. Cross-border court authority remains unclear.

U.S. regulators are already reviewing tokenized securities. The SEC explored an innovation exemption that would let some blockchain-based products trade under tailored rules, crypto.news reported. The agency later delayed the proposal after exchanges raised questions about shareholder rights and ownership verification.

The IMF's message adds a global dimension to that domestic debate. Faster settlement can improve markets. Weak standards could split liquidity across competing platforms. If tokenized assets move across borders in real time, supervisors have less time to respond during stress.

Adrian said central banks and regulators must decide how tokenized finance should use public and private money. Market operators also need to decide how platforms should connect and how critical smart contracts should be supervised. Without common rules, tokenization may stay fragmented across separate systems instead of becoming a safer settlement model for global finance.

Adrian's post ran on July 2. No timeline for international rulemaking has been set.