Financial assets represented on programmable digital ledgers could make trading and settlement more efficient, but today’s tokenized markets remain small, fragmented and often less liquid than their traditional counterparts, the International Monetary Fund says.
In an October analysis, IMF researchers said tokenized repurchase agreements accounted for the bulk of activity, averaging roughly $300 billion to $350 billion in daily transactions. The report compares that flow with around $13 trillion a day in the US repo market.
A repurchase agreement, or repo, is a short-term financing transaction in which securities are sold with an agreement to buy them back. Daily transaction volume measures activity over a period; it is not the total value of assets outstanding.
What tokenization changes
Tokenization means representing a financial asset or claim on a programmable digital ledger. Depending on the design, the record may be used to transfer a claim, reconcile holdings or automate a contractual step. The legal rights attached to a token still depend on the underlying arrangement and applicable law.
Supporters expect shared records and automated instructions to reduce reconciliation work and shorten the interval between a trade and settlement, when the asset and payment are delivered. An IMF note on tokenized finance says these systems could change how settlement, liquidity and risk management operate.
Faster processing is not automatically cheaper or safer for every participant. A business or investor must still understand who holds the underlying asset, whether the token conveys an enforceable claim and what happens if the platform or a service provider fails.
Trading around the clock
The IMF analysis says more than half of the trading it examined occurred outside traditional market hours. About 80% of the tokenized equity trades analyzed were smaller than one share.
Those observations concern the transactions in the researchers’ sample. They do not show that most conventional shares are traded on ledgers or that fractional trading always gives an investor the same legal rights as direct ownership.
Continuous trading can give investors more opportunities to transact. It can also require firms to manage funding and operational risks outside the hours in which traditional support services are available.
Our earlier report on non-bank finance and monetary policy examined how financial intermediation can move across institutions. Tokenization focuses on a different question: how the infrastructure recording and settling claims is organized.
Liquidity and safeguards
Liquidity describes the ability to buy or sell an asset without causing a large price change. The IMF says trading across separate platforms and networks can split buyers and sellers into smaller pools, weakening liquidity and contributing to price differences.
Speed can introduce its own pressures. Automated collateral calls or settlement requirements may require participants to find cash quickly. During a market shock, those demands could contribute to asset sales rather than allowing more time to arrange funding.
The IMF recommends clear legal rights, consistent regulation for similar activities, safe settlement assets and better connections between platforms and existing systems. Its report presents potential risks and policy choices, not a forecast that tokenization will cause a crisis.
For an investor comparing products, the ledger is only part of the decision. Fees, redemption conditions, custody, legal protections and the ability to sell remain central to the value of the underlying claim.
