## Optimal Policy for Financial Market Tokenization

_IMF Working Papers, September 19, 2025_

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## Bibliographic details
- Authors: Itai Agur, Alexander Copestake
- Published: September 19, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229026505.001

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### Overview
- Topic: Analysis of competing broker initiatives to "tokenize" financial assets—i.e., represent them on programmable platforms.
- Objective: Provide the first formal framework for analyzing optimal policy toward tokenized financial market platforms and their interoperability.
- Setting: Brokers with heterogeneous market power compete to attract investors and execute trades intra-broker or on a legacy platform; coalitions of brokers can invest in creating a tokenized market with faster, cheaper inter-broker settlement.

### Analytical framework
- Model elements:
  - Brokers differ in market power and choose whether to join coalitions to create a tokenized market.
  - Trades can be executed intra-broker, on a legacy platform, or on a tokenized market created by a coalition.
  - Investment by coalitions lowers inter-broker settlement costs and speeds settlement.
- Equilibrium considerations:
  - Partial coalitions can divert trades away from excluded competitors.
  - Equilibrium coalition structures can generate outcomes with either excessive investment or insufficient tokenization relative to the social optimum.

### Main findings
- Market structure effects:
  - Partial coalition formation leads to trade diversion from excluded brokers, shaping coalition incentives and equilibrium outcomes.
  - Heterogeneity in broker market power is central to coalition formation and investment levels.
- Policy sufficiency:
  - Public-private cost-sharing alone is not sufficient to achieve the social optimum.
  - Interoperability mandates alone are not sufficient to achieve the social optimum.
  - The combination of public-private cost-sharing and interoperability mandates can achieve the social optimum.
- Robustness:
  - The results hold when incorporating an open-access ledger (e.g., a public blockchain).

### Policy implications and recommendations
- Policy instruments should be combined:
  - Use a combination of public-private cost-sharing and interoperability mandates to attain socially optimal tokenization outcomes.
- Caution on partial support:
  - Policymakers should be wary of supporting partial coalitions or unilateral broker initiatives without ensuring interoperability, as these can produce excessive or insufficient investment and undesirable market fragmentation.
- Consideration of ledger architecture:
  - Policies remain pertinent when an open-access ledger (public blockchain) is part of the architecture; interoperability and cost-sharing remain key levers.

### Key descriptors and metadata (as presented in the source)
- Authors: Itai Agur, Alexander Copestake
- Publication date: September 19, 2025
- Series: IMF Working Paper No. 2025/185
- Pages: 58
- DOI: https://doi.org/10.5089/9798229026505.001
- ISBN: 9798229026505
- ISSN: 1018-5941
- Subjects/Keywords: asset tokenization, Blockchain and DLT, Coalition formation., coalitions of broker, Competition, Intermediation, Interoperability, interoperability mandate, Tokenization, tokenization partnership, tokenized market, tokenized market formation, trades intra-broker, Trading platforms

*Source: "Optimal Policy for Financial Market Tokenization" by Itai Agur and Alexander Copestake, IMF Working Papers 2025, 185 (September 19, 2025); DOI: https://doi.org/10.5089/9798229026505.001.*

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_Source: https://www.imf.org/en/publications/wp/issues/2025/09/19/optimal-policy-for-financial-market-tokenization-570540_