What Is Needed for Tokenization to Deliver

IMF Blog, October 8, 2026

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Authors: Gonzalo Fernandez Dionis, Caio Ferreira, Mindaugas Leika, Athanasios Vamvakidis
Published: October 8, 2026

Tokenization promises faster transactions, lower costs, broader access, and seamlessly operating markets.
The reality is more complicated: tokenized markets are growing rapidly but remain very small and fragmented.
If widely adopted, tokenization could reorganize markets by representing assets directly on distributed programmable ledgers and combining functions traditionally performed by separate institutions and infrastructures (issuance, trading, settlement, servicing), and by compressing sequential processes.

Source: Chapter 3 of the October 2026 Global Financial Stability Report: “Scaling Tokenization: New Efficiencies, New Vulnerabilities.”

Repurchase agreements (repos) account for the bulk of tokenized activity, averaging around $300 billion to $350 billion in daily transaction volume.
Trade in tokenized assets (credit, money market funds, and equities, among others) adds another $65 billion in daily transaction volume.
By comparison, the volume of the US repo market is about $13 trillion daily, and global capital markets represent $300 trillion in assets.
Issuance of tokenized assets is concentrated in a few markets, such as the US and a few major offshore jurisdictions.
Trading is highly fragmented across platforms, networks, and settlement arrangements.

Legal certainty: Investors require legal certainty that tokenized assets represent enforceable rights.
Regulatory clarity: Regulators ought to clarify how existing rules apply to new ledgers and market functions.
Interoperability: Platforms will have to become interoperable rather than remain isolated liquidity pools.
Settlement assets: Settlement needs to rely on safe, widely accepted forms of money.

More than half of trading occurs outside traditional market hours, indicating demand for continuous around-the-clock access.
Fractional ownership is widely used; around 80 percent of the tokenized equity trades analyzed were executed in sizes smaller than one share.
Overnight tokenized-equity returns are reflected in traditional equity prices shortly after the market opens, suggesting tokenized and traditional markets respond to similar information.
Tokenized markets today remain relatively illiquid and exhibit higher volatility than traditional counterparts.
Fragmentation across multiple networks and venues weakens liquidity, prevents efficient price formation, and contributes to price deviations.
The value of a tokenized ecosystem depends on how many assets, investors, and settlement instruments are connected; network growth and consolidation can increase liquidity, efficiency, and composability (the ability of smart contracts to interact and combine with each other).

Scaling tokenized markets can amplify risks, creating new channels for transmitting and amplifying traditional financial risks such as fire sales, liquidity runs, and contagion through greater interconnectedness and leverage.
Current sequential processes (messaging, trading, delayed settlement, reconciliation) add frictions and costs but also provide buffers, safety, and liquidity management that could disappear in a fully tokenized environment.
Policy priorities to foster safe and efficient development:
- Adopt a technology-neutral approach.
- Clarify the legal rights linked to tokenized assets.
- Ensure similar activities are regulated consistently regardless of technology.
- Support interoperability between tokenized platforms and traditional financial systems.
- Continue monitoring emerging vulnerabilities (interconnectedness, leverage, liquidity risks) and ensure safeguards keep pace as markets scale.