IMF: Tokenization could reshape settlement, shift risk

The International Monetary Fund said tokenizing financial assets can compress multi-day settlement into near-instant transactions and shift risk away from banks and brokers onto distributed ledgers, smart contracts and the firms that run them. The assessment appeared in a blog published Thursday by Tobias Adrian, the IMF’s financial counselor and head of the Monetary and Capital Markets Department.

Tokenization means representing asset rights and settlement instructions as digital tokens on a shared ledger so transfers can be executed programmatically. The IMF said that faster settlement would remove some traditional counterparty exposure but concentrate operational and code risk in the new infrastructure.

The fund listed policy questions that will shape how tokenized markets develop: which instruments qualify as settlement assets, how governance is handled on ledger platforms, technical interoperability across systems and the role of central banks in providing settlement finality. In the blog, Tobias Adrian wrote that policymakers “have a narrow window to determine how tokenized markets evolve,” and that choices made now will affect market structure going forward.

The IMF identified specific risks tied to tokenization, including vulnerabilities in smart-contract code, service concentration among a small number of infrastructure providers, legal uncertainty about digital rights, and difficulties reconciling ledger records with existing legal and accounting frameworks. The fund urged coordinated oversight to enable platform interoperability, set rules for settlement finality, and require governance and operational resilience standards.

Market participants and regulators are already acting. Major U.S. banks that own The Clearing House plan to pilot a tokenized deposit network targeted for early 2027 to keep deposits within the regulated banking system while enabling faster, programmable payments. Research from consulting and ratings firms indicates banks and intermediaries are preparing operationally and strategically for tokenized finance.

Regulatory responses include efforts to clarify how existing securities laws apply to tokenized assets and the consideration of limited trial exemptions that would allow testing of blockchain-based trading systems while longer-term rules are developed. The IMF said coordinated regulatory work and common technical standards will be needed to reduce the risk of fragmented, incompatible platforms.