The IMF warns that financial tokenization is accelerating—expanding the scale of on-chain RWA—while also potentially creating new systemic risks for the global market.
The International Monetary Fund (IMF) has just issued a stern warning about the surge in tokenized finance. The organization believes that the trend of digitizing assets and payment infrastructure on blockchain is no longer a peripheral experiment. If it continues to expand at the current pace, the operating structure of global capital markets could be rewritten.
The IMF sees tokenization as a structural change, not a technical upgrade
In a note released on 4/1, the IMF emphasized that tokenization (turning assets into tokens) does not only help financial systems operate faster. The key point is that market confidence is shifting from traditional intermediaries to code, smart contracts, and shared ledgers. This causes the market’s architecture to change from the ground up.
Unlike viewing tokenization as an added layer of technology, the IMF sees it as a process of restructuring the entire financial value chain. From asset issuance, to trading and settlement, to risk management, everything can be automated on digital infrastructure. Once that happens on a large scale, old bottlenecks disappear, but new points of breakdown also emerge.
On-chain RWA has grown to a scale large enough to draw attention
New data shows that tokenized RWAs (real-world assets, tokenized real-world assets) have reached about $27.5 billion at the beginning of April. This indicates that institutional capital has started flowing into on-chain infrastructure in a substantive way. The story is no longer hypothetical.
Most of the current scale is concentrated in products related to US Treasuries—that is, U.S. government bonds issued by the U.S. Department of the Treasury. This group of assets accounts for more than $12 billion, far surpassing tokenized commodities, credit, and equities. That reflects that the current appetite of capital is still heavily tilted toward yield-generating instruments and fixed-income returns.
In other words, tokenization is being driven by institutional investors’ needs to optimize their balance sheets and improve settlement efficiency. Retail is not the main driver in this phase. This is an important signal because institutional capital flows often come with higher demands for scalability, liquidity, and compliance standards.
A new financial architecture built with code
The IMF believes that tokenized finance is changing the foundation for building trust in the system. Previously, the roles of confirming transactions and mitigating risk mainly rested with banks, clearinghouses, and market intermediaries. In the new model, that work is gradually being shifted toward smart contracts and real-time settlement mechanisms.
The benefits are obvious: transaction speeds increase sharply, and friction costs fall. With markets operating almost 24/7, assets circulate faster, reduces settlement latency, and limits, to some extent, counterparty risk. For trading desks and asset management organizations, this is a major attraction in terms of capital efficiency.
But that structure also means that many safety buffers of traditional finance are being narrowed. Verification, reconciliation, and slow processing steps that once played the role of absorbing shocks may disappear. A faster system does not automatically mean it is safer.
Speed and automation can amplify liquidity shocks
The IMF’s biggest warning lies in the very factors that make tokenization attractive. Automated margin calls, real-time settlement, and programmable financial flows could cause liquidity stress to spread nearly instantaneously. When volatility spikes, the market may no longer have enough time to self-correct.
In traditional systems, latency sometimes functions as a natural shock absorber. Trades that don’t match immediately, payment procedures that take longer, and the participation of intermediaries create a buffer that allows investors to rebalance positions. On tokenized infrastructure, this buffer thins out significantly.
The consequence is that risk can spread through multiple links at the same time. A pricing shock or a strong liquidity withdrawal no longer gets contained within each intermediate layer. It can trigger a chain reaction across the entire network in a very short time.
Code vulnerabilities and system design are core risks
The IMF also highlights that technical risk is not just something on the surface. Errors in smart contracts, infrastructure design flaws, or poor governance mechanisms can affect multiple market participants at the same time. Once the system’s core logic malfunctions, the damage does not stop at a single entity.
This is a major difference between operational risk in TradFi and DeFi-style infrastructure. In the old model, internal failures of individual organizations are often isolated to some extent. In the new model, the same layer of code can be the backbone of many products, making risk more highly concentrated than many people imagine.
The risk of fragmentation between tokenization platforms
Another issue the IMF pays special attention to is the fragmentation of the future financial system. Tokenization platforms can operate with different standards, different rules, and different layers of collateral assets. If there is no common standard, liquidity will be split up and network effects will weaken.
This problem becomes even more complicated at the cross-border level. Stablecoins, tokenized deposits, and CBDC (central bank digital currency) are competing to become the dominant payment layer. When multiple kinds of “digital money” coexist but are not fully compatible, the risk of systemic fragmentation will rise quickly.
For policymakers, this is a problem that cannot be solved with a single set of local rules. Cross-border digital capital flows operate while the regulatory framework remains fragmented by country and region. If supervisory standards are not aligned, tokenization may expand faster than regulators’ capacity to manage risk.
Balancing innovation and stability will determine the market’s trajectory
The IMF does not deny the efficiency benefits that tokenization can bring. The issue is that the market is entering a stage where operational benefits and systemic risks are both accelerating. In that context, the quality of mechanism design and regulatory capacity will determine whether tokenization becomes a catalyst or a new source of instability.
In the short term, the trend of tokenizing real-world assets is still very likely to continue expanding, driven by attractive yields from U.S. government bonds and demand to optimize payments. In the medium term, the race will shift toward infrastructure standards, interoperability, and risk-control models. Whoever controls the settlement layer will have a significant advantage in the next infrastructure cycle.
From the perspective of capital flows, the IMF’s message is a clear reminder that tokenized finance is not just a technology narrative. It is gradually becoming a new layer of market infrastructure with direct impact on liquidity, leverage, and financial stability. As the scale of on-chain RWA continues to swell, any missteps in system design will become far more expensive.
