The IMF dropped an explanatory video on its X handle today exploring the new phenomenon of tokenized markets.
The international body responsible for ensuring the stability of the global monetary system recognized the advantages of tokenized markets in the video, but warned that they can be prone to flash crashes and are more volatile than traditional markets.
“Tokenization can make financial markets faster and cheaper, but efficiencies from new technologies often come with new risks,” the video said.
IMF lays out benefits of tokenized markets
The video frames tokenization as the next step in money’s evolution, explaining that tokenization can make it “faster and cheaper to buy, own, and sell assets” by cutting down the long chain of intermediaries.
Instead of relying on clearinghouses and registrars, a tokenized market can automate those functions in code.
According to the IMF, researchers studying early tokenized markets have already “found significant cost savings,” with programmability allowing near‑instant settlement and more efficient collateral use.
Related: Binance adds BlackRock’s BUIDL as off-exchange collateral for institutional traders
Warns of risks tokenization can bring
Still, the IMF stresses that those same efficiencies can amplify familiar dangers. Automated trading has “already led to sudden market plunges known as flash crashes,” and the IMF cautioned that tokenized markets, with instantly executed trading, “can be more volatile” than traditional venues.
In stressed conditions, complex chains of smart contracts “written on top of each other” may interact “like falling dominoes,” turning a local problem into a systemic shock.
The video also highlights the risk of fragmentation if many tokenized platforms emerge that “don’t speak to each other,” undermining liquidity and failing to deliver on the promise of faster, cheaper markets.
It also hinted at increased participation from governments. “Governments have rarely been content to stay on the sidelines during important evolutions of money.”
It added that, if history is any guide, they are likely to take “a more active role in the future of tokenization.”
Governments’ role in money shifts
History is littered with examples of global governments’ participation in monetary evolutions. In 1944, the Bretton Woods agreement saw governments actively redesign the global monetary system, fixing exchange rates to the United States dollar and tying the dollar itself to gold. It was a top‑down decision that shaped cross‑border finance for a generation.
When mounting fiscal costs and external imbalances made the gold peg unsustainable, the collapse of that framework in the early 1970s ushered in fiat currencies and floating exchange rates, alongside structurally larger public‑sector deficits in many advanced economies.
Related: Gold buying boom mirrors Bitcoin’s momentum: Deutsche Bank
IMF research meets a maturing tokenization market
This is not the IMF’s first foray into tokenization. The fund has spent years probing the tokenization market structure and digital money. Shifting that analysis into a public‑facing explainer video shows that tokenization is now seen as a mainstream policy issue, rather than a niche experiment.
Tokenized markets have grown into a multibillion-dollar industry with key players like BlackRock’s BUIDL fund quickly becoming the world’s largest tokenized Treasury fund, surpassing Franklin Templeton’s Franklin OnChain US Government Money Fund while expanding through 2024 and 2025.
The IMF’s video posits that while tokenization may deliver faster, cheaper and more programmable markets, those markets will grow under close regulatory scrutiny and governments will be ready to intervene.
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