IMF Says Tokenization Can Cut Friction in Finance but May Create New Stability Risks

• The IMF says tokenization could reduce friction and improve transparency across financial markets.
• It also warns that the overall effect on financial stability remains uncertain as faster, more automated systems create new risks.

The International Monetary Fund is giving tokenization a cautious endorsement, and a fairly clear warning at the same time.

In a new 23-page note published Thursday, the IMF said tokenization has the potential to make finance more efficient by reducing friction, improving transparency and changing how assets, payments and risk management operate across markets. But it stopped well short of presenting the shift as an uncomplicated upgrade. The Fund said the net effect on financial stability is still uncertain.

Faster settlement, fewer intermediaries, different risks

The IMF’s core argument is that tokenization is more than a simple technical improvement. It describes the shift as a structural change in financial architecture, one in which shared ledgers, programmable assets and smart-contract-based processes alter settlement, liquidity and the distribution of risk.

That can bring obvious advantages. Atomic settlement and better transparency can reduce some traditional vulnerabilities, especially those tied to delayed reconciliation, manual processing and fragmented records. But the same features may also compress risk into shorter timeframes. When markets move faster and more automatically, stress can travel faster too.

The IMF’s warning is really about system design

What stands out in the report is the balance. The IMF is not dismissing tokenization. If anything, it is acknowledging that the technology could remove old bottlenecks in finance. Still, it is warning that efficiency is not the same thing as resilience.

The concern is that code-driven settlement, programmability and new forms of market infrastructure may solve familiar problems while creating different ones around interoperability, legal certainty, liquidity behavior and systemic stress transmission. That leaves regulators and market participants with a harder task than simple adoption. They have to decide not just whether tokenization works, but whether it works safely once scale arrives.