IMF Urges Stronger Government Role as Tokenized Finance Expands
The International Monetary Fund (IMF) has cautioned that tokenized financial markets — where assets and transactions are recorded on programmable digital ledgers — could bring efficiency gains but also higher volatility and flash-crash risks compared with traditional finance.
In a , the IMF described money as having “come a long way since the first uses of shells or coins,” noting that most people now use digital forms of money. The Fund called tokenization the “next step in this evolutionary story,” allowing financial assets to become programmable.
“Tokens can make it quicker and cheaper to purchase, own, and trade assets,” the IMF said, highlighting how tokenization can automate processes currently handled by intermediaries such as clearing houses and registrars.
While tokenization promises significant cost savings, the IMF warned that it also introduces new risks.
“Efficiencies from new technologies often come with new risks,” the Fund said, referencing past incidents of automated trading triggering sudden market plunges, commonly known as flash crashes. In tokenized markets, “with their instantly executed trading, [markets] can be more volatile.”
The IMF also flagged composability risks — where multiple smart programs interact with each other — which could worsen crises.
“In a crisis, these could interact adversely like falling dominoes,” the Fund said. Poor interoperability between tokenized markets could further fragment trading and limit the expected efficiency gains.
The Fund emphasized the role of policymakers in mitigating these risks, noting that governments have historically played active roles in shaping the evolution of money. “Specific policies may be needed for tokenization to really deliver on its promise, while limiting the risks,” the IMF concluded.
As financial institutions increasingly explore tokenized assets and programmable money, the IMF’s warning reflects the need for regulatory secureguards to ensure that quicker, cheaper markets do not come at the cost of financial stability.
Related Developments From the IMF And Global Markets
The , warning that liquidity could disappear rapidly under stress, potentially amplifying shocks across the broader financial system.
At the identical time, the BIS has strengthened its focus on digital money and innovation by , to head its work in this area, signaling closer coordination between major global institutions on the future of money.
Separately, an its much-publicised daily BTC purchases, with recent changes in its reported holdings linked to internal wallet movements rather than fresh accumulation.
Press time data shows that El Salvador holds about 7,484 BTC, currently valued at approximately $691 million at market prices, placing the country among the world’s largest sovereign BTC holders.
