IMF Warns Tokenized Markets Could Spread Financial Shocks

Tokenized financial markets are expanding but remain small compared with traditional markets, according to a Thursday analysis from the International Monetary Fund. Legal uncertainty, limited interoperability and a lack of widely accepted settlement assets are slowing adoption.

Tokenized repurchase agreements, or repos, account for most activity in the sector. Daily transaction volumes average $300 billion to $350 billion, compared with about $13 trillion in the broader U.S. repo market.

Tokenized real-world assets had an outstanding value of about $65 billion in July, versus roughly $300 trillion in global capital-market assets. Tokenized credit accounted for $30.4 billion, followed by money market funds at $17.5 billion and equities at about $2.3 billion.

Investors are using tokenized equities for trading outside regular market hours and for fractional ownership. More than half of tokenized equity trading occurred outside standard U.S. market hours, while about 80% of trades involved less than one share.

The analysis found that overnight price changes in tokenized equities appeared in traditional stock prices shortly after U.S. markets opened. The finding indicates that tokenized markets can provide price information outside regular trading hours.

Tokenized equities were less liquid and had about 1.5 times the realized volatility of comparable traditional stocks. The IMF warned that stronger links between tokenized and traditional markets, combined with higher leverage, could spread shocks through fire sales, liquidity runs and contagion.

The fund called for clearer legal and regulatory rules, better connections between tokenized and traditional financial systems, and safeguards for emerging risks. It reported that systemic risks remain limited because adoption is still relatively low.

The IMF has issued several warnings about tokenization and financial stability. In November 2025, it reported that automated trading and connected smart contracts could increase volatility and flash-crash risks. In April, it warned that faster settlement could speed up financial stress. A July analysis identified risks linked to fragmented platforms and weak coordination among regulators.

The European Securities and Markets Authority raised similar concerns last month. It warned that stronger links between crypto markets and traditional finance, including through tokenized equities, could increase the risk of financial shocks spreading across markets.

“Tokenization may yet transform finance, but its future will be determined less by technological possibilities than by policies that ensure market depth, trust, and sound safeguards,” the IMF authors wrote.