Tokenization · CoinDesk
Tokenization could make finance faster, but also more susceptible to shocks, IMF confirms
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Tokenization, the process of moving financial assets into a blockchain environment, could make markets faster and cheaper.
Key facts
- Frictions disappear, but so do buffers," Tobias Adrian, the IMF's head of monetary and capital markets, wrote in a blog post
- Tokenization, the process of moving financial assets into a blockchain environment, could make markets faster and cheaper
- Tokenization represents financial assets, such as stocks, bonds and bank deposits, on shared digital ledgers
- In TradFi, a trade is executed, cleared, settled and reconciled, with each step handled by a different institution
Summary
Tokenization represents assets like stocks, bonds and bank deposits on blockchain ledgers, enabling instant trades, ownership transfers and payment through smart contracts. It also removes the time buffers that slow the spread of shocks in traditional finance, the IMF warned. Without updated regulations, tokenization could amplify systemic risks, concentration, cybersecurity threats and volatile cross-border flows, especially in emerging economies, the financial institution said. "Frictions disappear, but so do buffers," Tobias Adrian, the IMF's head of monetary and capital markets, wrote in a blog post.