IMF: Tokenisation Could Shift Risk to Platforms, Code

The International Monetary Fund warned in a new paper that tokenisation could shift risk off banks’ balance sheets onto platforms, distributed ledgers and smart contracts. The change could affect how banks fund themselves, manage liquidity and bear risk.

Tokenisation converts rights to assets into digital tokens on distributed ledgers. The technology can speed settlement, lower payment costs and create programmable assets. The IMF says these features remove centralised databases and sequential processes that have supported securities markets.

The paper warns that faster settlement reduces buffers such as staggered settlement and reconciliations. “Liquidity demands materialize in real time, collateral calls can be automated, and failures can propagate faster than institutions or supervisors can respond,” the IMF wrote.

Risk that once sat on individual institutions’ balance sheets may become concentrated in platforms and the code that governs transactions, the paper notes. That would shift the point of vulnerability from banks to service providers and the distributed ledger infrastructure.

The IMF called for legal clarity on whether tokenised records constitute definitive ownership, whether settlement finality is recognised under law, and which jurisdiction applies. The paper said lack of legal certainty could keep tokenisation fragmented and limit adoption.

Policymakers should also address interoperability between frameworks and ledgers, code governance, liquidity backstops and the role of public versus private money, the paper recommends. The fund said a preferred outcome would preserve risk-free settlement assets and internationally aligned oversight while enabling interoperability.

The IMF urged policy choices now to determine whether tokenisation strengthens or fragments the global financial system. It recommended clearer legal frameworks, stronger operational resilience standards for platforms and arrangements to prevent excessive risk concentration outside bank regulation.