The International Monetary Fund (IMF) has released a new assessment of the tokenization sector, predicting the rapid expansion of on-chain representation of financial claims and warning that this change could reconfigure the global financial system and introduce new systemic vulnerabilities.
IMF flags limitations of traditional resolution tools
in Note The IMF announced on Wednesday that tokenization is not just a technological innovation, but an institutional change.
Tokenization changes the way insurance claims are created, moved and settled by converting money, securities and derivatives into programmable digital tokens recorded on a shared ledger, the IMF said.
This change carries both the potential for efficiency gains and the risk of significant disruption to established rules and regulations, the memo states. Crisis management framework.
The Fund’s main concern is that tokenized finance does not fit neatly into the nationally and regionally bound legal and oversight structures that underpin current resolution regimes.
Traditional crisis management tools rely on jurisdictional control of institutions, infrastructure, and assets. In contrast, the IMF describes a tokenized system that allows transactions across multiple jurisdictions to be executed at “machine speed.”
The IMF warns that this could leave authorities with limited means to contain stress where key control points in a tokenized environment may depend on governance keys. consensus mechanismor the logic of smart contracts rather than domestically based entities.
A five-point roadmap to curb “tokenization risk”
To address these tokenization challenges, the IMF is developing a so-called “coherent policy roadmap” built around five pillars that address the new allocation of trust and risk created by tokenized infrastructure.
First, fund claim settlements should be made in the form of a secure currency. Systemically important tokenized transactions should ultimately be settled with assets that minimize credit and liquidity risks.
Second, the IMF calls for the adoption of global standards and recommendations. cryptocurrency market This is consistent with the principle of “same activities, same risks, same regulatory consequences” and reflects the work of the IMF and the Financial Stability Board to date.
Third, the Fund seeks legal certainty. Lawmakers and courts should clarify the legal status of the tokenization sector, how ownership records are established, when settlements will ultimately occur, and ensure that the legal framework evolves in parallel with technology deployments, he said.
Fourth, the IMF recommends common standards on settlement expectations and finality, and cooperative supervisory arrangements to prevent fragmentation and manage cross-border risks.
Fifth, liquidity and crisis management frameworks must adapt to a continuous 24/7 automated environment. Central banks and other authorities may need to develop new tools or operate them directly within the central bank. Tokenized infrastructure This is to maintain the effectiveness of policy instruments.
The IMF argues that these measures, taken together, form the backbone of a stable and efficient tokenized financial system. The Fund notes that implementation of the Roadmap will require continued and close collaboration between public authorities and private sector participants across jurisdictions.
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