The International Monetary Fund (IMF) in its 23‑page report addressed the topic of tokenization. It outlined the advantages and disadvantages of this solution.
IMF publishes a report on tokenization
The Fund, in its new report, stated that tokenization can improve cross‑border payments and financial integration in developing economies. Not everything is however so rosy: the organization also expressed concerns about volatility and "erosion of monetary sovereignty".
"The net impact of tokenization on financial stability is uncertain," the IMF said in a more than 20‑page document published on Thursday. "Atomic settlements and increased transparency reduce some traditional threats, but speed and automation introduce new ones", it added.
The IMF also admitted that tokenization expands the way in which securities and other financial products are issued, sold, settled and managed. All risk associated with these processes is, however, as experts point out, "transferred" from the banking system to shared ledgers and smart contract code.
"Stress events in tokenized markets will likely develop faster than in traditional systems, leaving less time for discretionary interventions," the report continued.
The IMF also states that today the main hurdle to the development of this market is legal challenges. According to experts, without legal clarity regarding ownership records and finality of settlements, tokenized markets risk "fragmentation and peripherality".
The crypto industry is working on solving this problem. The key is a ERC‑3643‑compliant token standard in the Ethereum ecosystem, which provides access to tokenized products only to selected investors.
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Tokenization has Wall Street support
Tokenization as a process and a new trend is promoted by many Wall Street leaders. Just name BlackRock CEO Larry Fink. His company plans to tokenize everything in the future: from stocks and bonds to money‑market funds and real estate.
The largest tokenization platform by total value locked is Securitize – the tokenization platform behind the BlackRock USD Institutional Digital Liquidity Fund. It boasts a capital of up to 3.38 billion USD (CryptoDep data). Tether Gold and Ondo Finance rank second and third with 3.35 billion and 3.21 billion USD respectively.
Meanwhile Intercontinental Exchange, the parent company of New York Stock Exchange, is taking actions aimed at developing tokenization. In January, it announced that it would launch a tokenization platform for 24‑hour trading and instant settlement of ETF shares and funds using a post‑trade system based on blockchain.
Coinbase Asset Management introduced tokenized units of the Coinbase Bitcoin Yield Fund. Everything runs on the Ethereum platform. It did so with the help of financial services firm Apex Group, which implemented the ERC‑3643 standard to ensure "identity and rights compliance of token holders".
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