{
  "title": "Tokenization and Financial Market Inefficiencies",
  "publication": "Fintech Notes, January 29, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/fintech-notes/issues/2025/01/29/tokenization-and-financial-market-inefficiencies-561256",
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  "summary": "Most financial assets are digital today. Tomorrow, they may be tokenized. Tokenization implies recording and transferring assets on a widely shared and trusted digital ledger that can be programmed.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Tokenization: recording and transferring assets on a widely shared and trusted digital ledger that can be programmed.\n- Purpose of the note: introduces a taxonomy and a conceptual framework centered on market inefficiencies to evaluate consequences of tokenization for financial markets.\n- Scope: discusses how inefficiencies might change across the asset life cycle, which inefficiencies could persist, and what new inefficiencies could emerge."
    },
    {
      "heading": "Key findings on market frictions and costs",
      "content": "- Issuing, servicing, and redeeming assets might involve fewer intermediaries and thus become cheaper.\n- Trading costs may decrease because tokenization:\n  - Lowers some counterparty risks.\n  - Reduces search frictions.\n  - Offers flexibility in settlement.\n- Greater competition among brokers could lower transaction fees.\n- Some inefficiencies would remain; new inefficiencies could appear."
    },
    {
      "heading": "Financial stability and systemic risks",
      "content": "- Tokenization may amplify shocks if it induces institutions to:\n  - Become more interconnected.\n  - Hold lower liquidity buffers.\n  - Hold higher leverage.\n- Programs (tokenization arrangements) may introduce new risks related to:\n  - Strings of contingent contracts.\n  - Faulty code."
    },
    {
      "heading": "Market structure implications",
      "content": "- Competition may grow among financial intermediaries.\n- Provision of market infrastructure could become more concentrated due to network effects.\n\n---\n\n Content in this bundle\n\n- Tokenization and Financial Market Inefficiencies\n  - Tokenization and Financial Market Inefficiencies (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Tokenization and Financial Market Inefficiencies (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fintech-notes/issues/2025/01/29/tokenization-and-financial-market-inefficiencies-561256"
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    "Authors: Itai Agur, Germán Villegas-Bauer, Tommaso Mancini-Griffoli, Maria Soledad Martinez Peria",
    "Published: January 29, 2025",
    "Series: Fintech Notes",
    "DOI: https://doi.org/10.5089/9798400298905.063",
    "Tokenization: recording and transferring assets on a widely shared and trusted digital ledger that can be programmed.",
    "Purpose of the note: introduces a taxonomy and a conceptual framework centered on market inefficiencies to evaluate consequences of tokenization for financial markets.",
    "Scope: discusses how inefficiencies might change across the asset life cycle, which inefficiencies could persist, and what new inefficiencies could emerge.",
    "Issuing, servicing, and redeeming assets might involve fewer intermediaries and thus become cheaper.",
    "Trading costs may decrease because tokenization:",
    "Greater competition among brokers could lower transaction fees.",
    "Some inefficiencies would remain; new inefficiencies could appear.",
    "Tokenization may amplify shocks if it induces institutions to:",
    "Programs (tokenization arrangements) may introduce new risks related to:",
    "Competition may grow among financial intermediaries.",
    "Provision of market infrastructure could become more concentrated due to network effects.",
    "**Tokenization and Financial Market Inefficiencies**"
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