## Tokenized Finance and Money

_IMF News, May 22, 2026_

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## Bibliographic details
- Published: May 22, 2026

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### Tokenization and the Financial System
- Tokenization can reconfigure how trust, settlement, and risk management are organized, constituting a structural reallocation of trust within the financial system.
- Three distinguishing features:
  - Programmability: smart contracts execute financial logic automatically (margin calls, coupon payments, collateral transfers).
  - Shared ledgers: a single synchronized source of truth replaces bilateral reconciliation.
  - Atomic settlement: delivery versus payment can occur simultaneously in near real time.
- Key implications and risks:
  - Locus of risk shifts from institutions to infrastructure (data feeds, algorithms, governance arrangements).
  - Supervisory frameworks premised on capital adequacy and conduct risk may be insufficient when failures originate in oracles or smart contracts.
  - Most consequential transformations are occurring within regulated finance (banks, asset managers, financial market infrastructures), not in permissionless crypto.
- Practical effects by sector:
  - Banking: tokenized deposits can unify payments, settlement, and liquidity management; around-the-clock settlement reduces ability to smooth liquidity via end-of-day netting and increases need for real-time liquidity management.
  - Asset-side/tokenized lending: embedded automatic interest accrual, collateral triggers, covenant enforcement — risk of automated enforcement amplifying procyclicality.
  - Capital markets: atomic delivery versus payment reduces counterparty risk but shifts liquidity demands to continuous real time and can accelerate collateral withdrawals in stress.
  - Financial market infrastructures: move toward permissioned shared ledgers with identifiable participants, governance, and AML/CFT compliance; consolidation reduces duplication but creates critical nodes whose failure could disrupt markets.

### Settlement, Speed, and Stability
- Settlement lags are costly but serve as buffers that allow netting, funding mobilization, and authority intervention; tokenized systems eliminate these buffers by design.
- Distinctive risks:
  - Automated margin calls can force rapid asset sales and reinforce procyclicality.
  - Algorithmic risk propagates instantaneously and autonomously; faults in price feeds or code can trigger cascading liquidations before authorities can respond.
- Policy implications:
  - Mandatory governance of code for systemically important contracts: formal verification, independent audits, transparent change management, and ability to pause execution under predefined emergency conditions.
  - Central bank backstops designed around business-day cycles are insufficient in a 24/7 environment; effective backstops may need to operate directly within tokenized systems at machine speed.
  - Legal clarity required on whether tokenized records constitute proof of ownership and whether on-ledger settlement carries finality; a dual-layer approach is emerging (smart contracts for operational rules + traditional legal agreements for rights and dispute resolution).
- Concrete pilots:
  - DTCC initiative: tokenized US Treasuries used as collateral to mobilize high-quality liquid assets in real time while maintaining legally enforceable control.
  - Eurex Clearing: regulatory non-objection for DLT-supported collateral mobilization, embedding process within existing CCP risk framework.
  - Pilots show tokenization can automate CCP functions but also that governance of algorithm and data inputs becomes systemic risk management.

### The Settlement Asset Question
- Traditional anchor: central bank money as ultimate settlement asset, preserving the singleness of money.
- Forms of digital settlement assets and implications:
  - Tokenized deposits: digital extension of bank liabilities; prudential regulation and deposit insurance apply; exposed to bank credit risk where deposits are uninsured.
  - Wholesale CBDCs: direct digital claim on the central bank, eliminating settlement asset credit risk; examples include Project Jura (cross-border atomic settlement) and Project Agorá (exploring unified ledger integrating tokenized deposits with central bank reserves).
  - Regulated stablecoins: privately issued, reserve-backed tokens; par convertibility depends on reserve quality, issuer's operational capacity, and liquidity of underlying funding and government securities markets.
- Core point: allocation of ultimate backstop is a policy choice that shapes who bears risk, provides liquidity, and governs infrastructure.

### Par Exchange and the Fragility of Stablecoin Pegs
- Four pillars sustaining par exchange in traditional systems: (1) settlement finality, (2) central bank as ultimate settlement asset, (3) standing liquidity facilities, (4) deposit insurance; resolution regimes complete the framework.
- Stablecoins currently lack access to central bank settlement, deposit insurance, and resolution frameworks; binding constraint is liquidity, not solvency.
- Current market practice: limited direct redemption access (small number of authorized participants); retail holders often must sell on secondary markets where prices can deviate from par.
- Analogy: economically similar to a fixed exchange rate with limited convertibility—peg sustained by rationed access to reserves.
- Stablecoin trilemma (at most two of three can be achieved):
  - Maintain par peg.
  - Open convertibility.
  - Choose reserve backing freely.
- Illustrative corners of the trilemma:
  - Sustaining par + issuer autonomy: hold less-than-fully liquid reserves + restrict convertibility to authorized agents; retail holders face secondary market deviations.
  - Synthetic CBDC model: maintain par + broaden convertibility via central bank backstop + high percent of reserves at the central bank/access to standing lending facility.
  - Open convertibility + issuer autonomy: hold illiquid reserves or algorithmic no-reserve designs — highly susceptible to confidence shocks and de-peg risk.
- Regulatory divergence will place issuers at different points on the triangle; no cost-free position.

### Risks in the Issuing Jurisdiction
- Risk categories for issuers: credit, market, liquidity, and operational risk in reserve management.
- Even with high-quality liquid asset reserves, par convertibility depends on operational capacity and market liquidity at the moment of need.
- Retail redemption mechanics create first-mover advantages during stress because many retail holders cannot redeem directly.
- Concentration risk example:
  - Silvergate Bank: crypto deposits reached 98 percent of total deposits at the end of 2021 — type of concentration that creates two-way contagion between stablecoins and banks.
- Potential systemic scale:
  - If stablecoins grow to the range of 2 to 3.7 trillion US dollars that some project, fire sales during runs could have spillovers to Treasury bill and repo markets, critical for monetary policy transmission.
  - Stablecoins currently hold approximately 2 percent of outstanding US Treasury bills.
  - Ahmed and Aldasoro (2025) suggest that a 3.5 billion US dollar change in stablecoin issuance could move T-bill yields by 2 to 8 basis points.
- At larger scale, stablecoins could materially change the structure and risk profile of sovereign debt as major holders of government securities.

### Regulation: Progress, Divergence, and Design Choices
- Global regulatory developments since 2023:
  - EU Markets in Crypto-Assets Regulation, in force since June 2024 with transitional provisions through July 2026.
  - UK draft stablecoin regulation currently in public consultation.
  - US GENIUS Act in the rulemaking phase.
  - FSB and IOSCO thematic reviews identify critical gaps in risk management, capital buffers, and recovery and resolution planning.
- Common elements across three major frameworks:
  - Direct remuneration by the issuer to holders is prohibited.
  - Each token must be backed one-to-one by corresponding reserves.
- Key divergences creating arbitrage risks:
  - Reserve composition:
    - EU requires a minimum of 30 percent in credit institution deposits, rising to 60 percent for significant stablecoins.
    - UK proposes 5 percent in commercial bank deposits and 40 percent at the central bank for systemic issuers.
    - US applies concentration limits but does not mandate a specific deposit minimum.
  - Redemption rules:
    - EU prohibits fees except under a recovery plan and requires redemption at par with no delay.
    - UK permits cost-linked fees and proposes next-business-day settlement, with same-day settlement for systemic issuers.
    - US permits fees with disclosure; early OCC proposals suggest settlement at T+2, extending to T+7 under stress.
- Cross-jurisdictional risks:
  - Divergent rules on redemption speed/cost create incentives for holder runs in jurisdictions with faster/cheaper redemption.
  - Reserve rebalancing across co-issuers may lag redemption pressures, creating financial stability concerns.
- Five decisive design characteristics that determine stablecoin impact on banking systems:
  1. Composition of reserve assets (credit/liquidity risk).
  2. Whether holders receive remuneration (affects payment device vs investment product dynamics).
  3. Whether issuer holds reserves directly at the central bank (quality of backstop).
  4. Whether issuer has access to central bank liquidity facilities in stress.
  5. Redemption rules (timelines, fees, minimums, suspension conditions).
- Spectrum of models:
  - Full-service / synthetic CBDC (all assets as central bank reserves) → ultimate public backstop.
  - Self-service (no central bank reserve access) → par convertibility depends on private reserve management and market confidence.
  - Partial-service (e.g., Bank of England proposal: at least 40 percent reserves at the central bank + access to standing backstop lending facility) sits between extremes.
  - The US is closer to self-service with some light-service elements as the Federal Reserve explores payment accounts for eligible institutions.
- Core policy imperative: preserve clarity about the nature of the settlement asset and the location of the backstop.

### The View from Recipient Countries
- Recipient countries bear the macro-financial impacts where stablecoins circulate, not where they are created.
- Potential benefits for recipient countries:
  - Reduce cost and increase speed of cross-border payments and remittances.
  - Increase competition, support financial inclusion, and enable programmable payments as integrated with AI.
- Three critical channels of risk to recipient economies:
  1. Fragmentation: lack of interoperability across stablecoins (reserve assets, regulatory standards, technical infrastructure) creates structural gaps and arbitrage.
  2. Contagion: runs on stablecoins can force liquidations that transmit price and capital flow volatility to recipient economies.
  3. Currency substitution and erosion of macroeconomic tools: foreign-currency stablecoins can displace local currency in transactions and savings, undermining monetary policy transmission, weakening financial stability, and eroding seigniorage; peer-to-peer transfers through unhosted wallets fall outside regulatory perimeter.
- Empirical points:
  - Stablecoin flows have surged in recent years; emerging market economies increasingly receive these flows.
  - Stablecoins have overtaken unbacked crypto assets as the dominant vehicle for cross-border crypto activity.
  - Net stablecoin flows into emerging markets remain small in absolute terms but have been accelerating since 2022.
  - For the most exposed emerging economies, stablecoin inflows are reaching levels increasingly significant relative to domestic financial systems.
- Drivers of adoption in emerging markets mirror traditional dollarization determinants: foreign exchange volatility, inflation, weak institutional frameworks, and poor policy credibility.
- Eurodollar analogy: instructive but limited — Eurodollars circulated within wholesale infrastructure later brought under oversight; stablecoins extend similar logic to retail users on networks with far less supervision, creating potential parallel exchange rate markets.

### Policy Options for Recipient Countries
- Primary defensive measures:
  - Strengthen macroeconomic fundamentals: credible monetary policy, sustainable fiscal positions, well-functioning domestic payment systems.
  - Where fundamentals are sound, demand for foreign-currency stablecoins as a substitute for local money is lower.
- Trade-offs for policymakers due to increased de facto capital mobility:
  - Options include accepting greater exchange rate flexibility, accepting reduced monetary autonomy, or finding methods to bring stablecoin flows within capital flow management frameworks.
  - Other tools: foreign exchange intervention, providing access to foreign-denominated assets through regulated channels, and setting limits on stablecoin usage where warranted.
- Data and surveillance prerequisites:
  - Reporting requirements must be embedded in laws and regulation to provide visibility into holders, amounts, and purposes.
  - Current constraints: limited data infrastructure, limited visibility on residence and sector of stablecoin holders, and significant off-chain activity (exchanges, over-the-counter desks, custodial wallets) that does not appear on-chain.
  - Institutional capacity constraints in many jurisdictions and cross-border coordination challenges when issuers, holders, and reserves are in different jurisdictions.
- IMF support:
  - Working with international partners under the G20 Data Gaps Initiative to establish a test data collection and develop harmonized data templates across multiple data sources.

### Concluding Observations and Policy Priorities
- Three closing observations:
  1. Tokenization is a structural transformation that shifts risk from institutions to infrastructure and requires governing code, data, and settlement with the same rigor applied to traditional institutions; policy window to shape architecture is open but time-limited.
  2. Stablecoins are the most immediate policy frontier; regulatory divergence across jurisdictions creates arbitrage risks; policy choices about reserve assets, central bank access, backstops, and redemption rules will determine the future monetary system.
  3. Macro-financial impacts of stablecoins will be felt most acutely in recipient countries; dollar stablecoins can facilitate digital dollarization, driven by familiar macroeconomic vulnerabilities but with lower barriers to entry and less supervision.
- IMF role:
  - Help member countries align domestic frameworks with global standards, close data gaps, and support emerging and developing economies confronting stablecoin-driven capital flow pressures through analytical and operational engagement.

*Remarks by IMF Financial Counsellor Tobias Adrian for the Third Conference on Stablecoins and Tokenization, hosted by the Federal Reserve Banks of Boston and New York — May 22, 2026.*

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## References

- [Tobias Adrian](http://www.imf.org/external/np/bio/eng/ta.htm)
- [United Kingdom and the IMF](http://www.imf.org/external/country/GBR/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [paper](https://www.imf.org/en/publications/imf-notes/issues/2026/04/01/tokenized-finance-574921)
- [Global Financial Stability Report](https://www.imf.org/en/publications/gfsr/issues/2026/04/14/global-financial-stability-report-april-2026)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2026/05/11/sp051126-tokenized-finance-and-money_