Tokenization is gaining ground in financial markets and is now sparking a broader debate about the future of monetary infrastructure. In a new analysis, the IMF estimates that this development goes well beyond digital payments. The institution considers that the transfer of financial assets to shared digital registers could profoundly change the functioning of markets. However, this transformation will depend on the political choices, legal rules and organization of the infrastructures which will accompany this new stage.
In brief
- The IMF believes that political choices will be decisive for the future of tokenization.
- Tokenization could transform payments, settlements and financial markets.
- Tokenized deposits, stablecoins, and tokenized central bank reserves are emerging as primary settlement assets.
- Banks are expected to evolve, while risks shift to digital platforms and infrastructure.
- The IMF calls for strengthening legal frameworks, interoperability and international coordination.
Tokenization is reshaping financial market infrastructures
According to Tobias Adrian, Director of Monetary and Capital Markets at the IMF, tokenization is not just about speeding up payments or making assets programmable. Above all, it modifies the way in which financial transactions are carried out. By bringing together execution, clearing and settlement into a single automated process, shared digital ledgers replace several traditionally separate steps.
THE report explains that “ this development reveals three main categories of settlement assets “. These are tokenized bank deposits, stablecoins and tokenized central bank reserves. Each of these solutions has different characteristics and meets specific needs of the financial system. Tokenization thus creates a new environment where several forms of digital currency can coexist.
Tokenized deposits retain the current banking framework while enabling atomic settlement and more efficient liquidity management. On the other hand, continuous settlement also requires mechanisms capable of providing liquidity in real time.
Stablecoins offer global reach and strong programmability, but their stability still depends on the quality of reserves, available liquidity and the strength of their issuer. As for tokenized reserves of central banks, they eliminate the credit risk of settlement assets, while requiring monetary authorities to operate or supervise programmable infrastructures.
The IMF highlights the benefits but also the new risks
The IMF emphasizes that this development will not lead to the disappearance of banks. On the contrary, financial institutions could see their functions evolve thanks to tokenization. Tokenized deposits would consolidate payments, customer transaction settlement and treasury functions on common ledgers. Tokenized loans would directly integrate interest calculations, collateral requirements as well as ongoing risk monitoring via smart contracts.
L'institution also observes a comparable transformation in the capital markets. Tokenized securities bring together issuance, trading, settlement, custody and compliance into a single flow. This organization reduces counterparty risk, but it also increases the need for permanent liquidity and the use of automated margin requirements.
Furthermore, she believes that the guarantees markets could be among the first to benefit from this development. High-quality assets could move more quickly between different platforms. However, Tobias Adrian warns that concentrating activities around the same infrastructure could turn a governance failure into a systemic problem.
High-quality assets can be mobilized quickly and across different platforms. But when infrastructure becomes the focus, governance failures turn into systemic problems.
Tobias Adrian, Director of Monetary and Capital Markets at the IMF, Source: IMF Blog.
In this context, tokenization gradually shifts the main risks to platforms, computer code and infrastructure providers rather than to the balance sheets of traditional financial intermediaries.
Interoperability, legal framework and financial stability at the heart of the issues
The report emphasizes that shared ledgers with restricted access could concentrate a large part of financial activity on a limited number of platforms. This organization would improve operational efficiency and liquidity. At the same time, it would reinforce the importance of cybersecurity, infrastructure resilience and crisis management. From this perspective, tokenization also requires strong interoperability between different platforms in order to avoid the return of new frictions on the markets.
The IMF also emphasizes that “ instant settlement calls into question current structures, still largely organized around working days “. This development may require new liquidity support mechanisms capable of operating directly on digital infrastructures.
At the same time, supervisory authorities will need to expand their scope to smart contracts themselves, while legal systems will need to clarify ownership rights, finality of regulations and the rules applicable across jurisdictions.
Finally, the document pays particular attention to emerging and developing economies. In these countries, tokenization could reduce the cost of cross-border payments and facilitate access to international financial markets.
On the other hand, massive adoption of global stablecoins issued by private actors could also accelerate capital movements and promote monetary substitution. The IMF therefore considers that solid national frameworks, combined with international coordination, will remain essential to support this transformation.
The next political, monetary and regulatory decisions are now expected to play a determining role in the evolution of this technology. As assets migrate to shared digital ledgers, balancing innovation, financial stability and governance will be one of the key challenges for public authorities and market participants.
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