IMF: Tokenized Markets Still Small, Still Risky, Still Talking About Interoperability 📜

Tokenization is reshaping financial markets by streamlining trading and settlement, but legal uncertainty and financial-stability concerns could slow broader adoption, the International Monetary Fund said Thursday. The IMF's analysis noted that tokenized financial markets are growing rapidly but remain small compared with traditional venues, hampered by poor interoperability and a lack of widely accepted settlement assets.

The gap between tokenization's potential and its current scale is visible in trading activity. Tokenized repurchase agreements, or repos, dominate tokenized trading activity, averaging $300 billion to $350 billion in daily transaction volume, compared with roughly $13 trillion traded daily in the broader US repo market. Beyond repos and stablecoins, outstanding tokenized asset value is concentrated in credit products and money market funds. Tokenized real-world assets (RWAs) reached approximately $65 billion in outstanding value as of July, a small fraction of the roughly $300 trillion in global capital-market assets. Tokenized credit accounted for $30.4 billion, followed by money market funds at $17.5 billion, while tokenized equities represented about $2.3 billion.

Despite their limited scale, tokenized equities are drawing investors seeking around-the-clock trading and fractional ownership. The IMF found that more than half of tokenized equity trading occurred outside regular US market hours, while roughly 80% of trades involved less than one share. The fund also reported that overnight price movements in tokenized equities appeared in traditional stock prices shortly after markets opened, suggesting tokenized markets could provide useful price signals outside regular trading hours.

The IMF cautioned that tokenized equities were significantly less liquid and exhibited roughly 1.5 times the realized volatility of their traditional counterparts. It warned that as tokenized markets grow, greater interconnectedness and leverage could amplify traditional financial risks, including fire sales, liquidity runs and contagion. The IMF called for clearer legal and regulatory frameworks, greater interoperability between tokenized and traditional financial systems, and safeguards to address emerging vulnerabilities as adoption expands. For now, the report noted that systemic risks currently remain limited because adoption is still relatively small.

This is not the first time the IMF has flagged tokenization risks. In November 2025, it warned that automated trading and interconnected smart contracts could amplify market volatility and flash crashes, and in April it cautioned that faster settlement cycles could introduce new stability challenges. The latest analysis builds on those earlier assessments while providing updated data on the size and structure of tokenized markets.