IMF: Tokenization Could Strengthen or Fracture the Financial System Depending on Policy Decisions

Tobias Adrian, Director of the IMF's Currency and Capital Markets Department, stated that whether tokenization will strengthen or fracture the financial system depends on policy decisions regarding currency, market infrastructure, and legal frameworks. Moving financial assets and liabilities to a shared ledger would streamline execution, settlement, and payment processes through software-managed concurrency, potentially concentrating risks in platforms, code, and market infrastructure providers. The report identifies three asset types in tokenized economies: tokenized bank deposits, stablecoins, and tokenized central bank reserves. Tokenized deposits could maintain the existing banking system while enabling atomic payments and efficient liquidity management, though persistent payments may increase demand for real-time liquidity support. Stablecoins offer programmability and global access but their equivalence to other currencies depends on reserve quality, market liquidity, and issuer stability. Adrian noted tokenization would transform rather than eliminate banks, integrating payment and settlement functions into shared ledgers and embedding interest accrual and collateral requirements into smart contracts. Emerging markets could benefit from reduced cross-border payment costs and increased market access, though expanded private stablecoin adoption may accelerate capital flows and currency substitution.