Tokenization is starting to move from pilots to real activity, but a new International Monetary Fund (IMF) analysis warns that the technology’s impact could be capped by legal uncertainty and safety concerns for the financial system.
In a Thursday blog post, the IMF said tokenized markets are growing quickly yet still remain small compared with traditional finance, pointing to barriers such as weak interoperability and the limited availability of widely accepted settlement assets.
Key takeaways
- Tokenized trading is expanding fast, but the overall market remains relatively small versus traditional counterparts.
- Tokenized repo activity dominates tokenized markets, while other asset classes are still concentrated in specific products.
- Tokenized equities show signs of after-hours usefulness, but the IMF finds they are less liquid and more volatile than traditional equities.
- The IMF cautions that greater interconnectedness and leverage could magnify financial instability risks as adoption grows.
- Regulatory clarity, interoperability, and safeguards are presented as prerequisites for scaling tokenized markets responsibly.
Where tokenized markets stand today
The IMF’s central message is a gap between tokenization’s promise and its current footprint. While tokenized financial markets are growing, they still represent only a small slice of broader capital markets.
According to the IMF, tokenized repurchase agreements (repos) account for most tokenized trading activity. Daily transaction volume in tokenized repos averages roughly $300 billion to $350 billion, the IMF contrasts with about $13 trillion traded each day in the broader US repo market.
Outside of repos and stablecoins, the IMF reports that outstanding value is concentrated in a narrower set of instruments—credit products and money market funds in particular. Tokenized real-world assets (RWAs) reached approximately $65 billion in outstanding value as of July, versus roughly $300 trillion in global capital-market assets.
Within tokenized RWAs, the IMF estimates tokenized credit at $30.4 billion, money market funds at $17.5 billion, and tokenized equities at about $2.3 billion.
For investors and builders, the distribution matters: if most liquidity is clustered in a handful of structures, it can shape pricing, risk, and execution quality across the entire tokenization stack—regardless of how compelling the technology is in theory.
Tokenized equities: 24/7 trading benefits, but liquidity gaps remain
Despite their modest overall size, tokenized equities are drawing attention for a reason that aligns with trading-demand trends: continuous access and smaller ticket sizes.
The IMF found that more than half of tokenized equity trading occurred outside regular US market hours. It also reported that roughly 80% of trades involved less than one share, consistent with the idea of fractional exposure.
More importantly for market participants, the IMF says overnight price movements in tokenized equities appear to show up in traditional stock prices shortly after the market open. In practical terms, that suggests tokenized venues may help generate or transmit price signals beyond standard trading windows.
However, the IMF also highlights limitations. Tokenized equities, it said, are significantly less liquid than traditional equivalents and show about 1.5 times the realized volatility. The IMF warns that these differences are not just academic metrics—they can affect execution quality, hedging, and the risk of sudden dislocations if activity scales quickly.
Looking forward, the IMF argues that scaling tokenized markets could increase the chances that risks travel across systems. As interconnectedness and leverage rise, traditional financial vulnerabilities—such as fire sales, liquidity runs, and contagion—could be amplified.
Still, the IMF notes that systemic risks appear limited for now, largely because tokenized adoption remains relatively small.
Why the IMF says policy and safeguards matter more than tech
The IMF’s blog frames tokenization’s next phase as a governance challenge as much as a technology upgrade. It calls for clearer legal and regulatory frameworks, greater interoperability between tokenized and traditional financial systems, and safeguards aimed at emerging vulnerabilities as adoption expands.
This stance is consistent with prior IMF warnings. In November 2025, the IMF cautioned that automated trading and interconnected smart contracts could amplify market volatility and flash crashes. Earlier in 2026, it warned that faster settlement could accelerate financial stress, and a July analysis emphasized systemic risks arising from fragmented platforms and insufficient regulatory coordination.
The underlying tension is straightforward: tokenization can reduce friction in trading and settlement, but the operational interlinks it creates can also compress how quickly problems surface—and how widely they spread—if rules and infrastructure are not aligned.
European regulators echo concerns about cross-market contagion
The IMF’s concerns are not limited to Washington. The analysis also points to warnings from European regulators.
According to the article, the European Securities and Markets Authority (ESMA) warned last month that growing links between crypto and traditional finance—including through tokenized equities—could raise the risk of financial shocks spreading across markets.
That concern ties back to the IMF’s broader theme: tokenization may bring new trading surfaces, but it also changes the plumbing of finance. When that plumbing connects venues, institutions, and risk systems, regulators tend to focus not only on individual products but on second-order effects—how instability can propagate when multiple markets share participants, liquidity pathways, or settlement dependencies.
What to watch next
As tokenized markets continue to grow, the next question for investors is whether legal clarity and interoperability improvements keep pace with trading expansion—and whether regulators can identify and contain liquidity and leverage build-ups before they become systemic. The IMF suggests that the technology is not the limiting factor; the policy and safeguards are.
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