IMF says tokenization could reshape finance, but growth hinges on regulatory framework

Tokenization has the potential to lower transaction costs and improve efficiency in financial markets, but its actual growth will depend on regulatory clarity, sufficient liquidity and proper safeguards, the International Monetary Fund said. In Chapter 3 of its October Global Financial Stability Report, the IMF said the future of tokenization depends less on the technology itself than on policies that support adequate market liquidity, trust and safeguards. Its analysis showed more than half of stock-token trades took place outside regular equity market hours, while around 80% were executed in sizes of less than one share, indicating demand for 24-hour trading and fractional investing. At the same time, the IMF said the tokenized market still lacks liquidity and is more volatile than traditional markets. It added that trading is fragmented across multiple platforms, creating price gaps, and warned that if the market grows further, fire sales and liquidity stress could spread across the broader financial system.