The IMF today published an explanatory video on X Handle that explores new phenomena in the tokenization market.
The international body responsible for ensuring the stability of the international monetary system acknowledged the benefits of tokenized markets in a video, but warned that they are prone to flash crashes and are more volatile than traditional markets.
“Tokenization makes financial markets faster and cheaper, but the efficiencies brought about by new technology often come with new risks,” the video states.
IMF explains the benefits of tokenized markets
The video sees tokenization as the next step in the evolution of money, explaining that it cuts out long chains of intermediaries, making it “faster and cheaper to buy, own, and sell assets.”
Instead of relying on clearinghouses and registrars, tokenized markets can automate these functions with code.
sauce: IMF
According to the IMF, researchers studying the nascent tokenization market have already “discovered significant cost savings” as programmability enables near-instant payments and more efficient use of collateral.
Related: Binance adds BlackRock’s BUIDL as off-exchange collateral for institutional investors
Warning about risks posed by tokenization
But the IMF emphasizes that these efficiencies can amplify familiar dangers. The IMF has warned that automated trading has “already caused sudden market declines known as flash crashes” and that tokenized markets with instant trading “may be more volatile” than traditional trading venues.
In stressful situations, complex chains of smart contracts “written on top of each other” can interact “like falling dominoes”, turning local problems into general shocks.
The video also highlights the risk that the emergence of many tokenization platforms that “don’t talk to each other” will lead to fragmentation, eroding liquidity and failing to deliver on the promise of faster, cheaper markets.
He then issued an ominous warning that more governments around the world will be involved in the future. “Governments are rarely content to sit on the sidelines in the important evolution of money.”
He further added that if history is any guide, they are likely to play a “more active role in future tokenization.”
Government’s role in money shift
History is full of examples of world governments participating in the evolution of currencies. The Bretton Woods Agreement of 1944 forced governments to aggressively redesign the world’s monetary system, pegging exchange rates to the U.S. dollar and tying the dollar itself to gold. This was a top-down decision that shaped cross-border finance for a generation.
When rising fiscal costs and external imbalances made the gold peg unsustainable, its collapse in the early 1970s led to structurally large public sector deficits in many developed countries, as well as the introduction of fiat currencies and floating exchange rates.
Related: Gold buying boom reflects Bitcoin momentum: Deutsche Bank
IMF study addresses mature tokenization market
This is not the first time the IMF has ventured into tokenization. The fund has spent years investigating tokenization market structures and digital money. Translating that analysis into a public-facing instructional video shows that tokenization is seen as a mainstream policy issue rather than a niche experiment.
The tokenization market has grown into a multi-billion dollar industry, with major players such as BlackRock’s BUIDL fund quickly becoming the world’s largest tokenized Treasury fund, surpassing Franklin Templeton’s Franklin On-Chain U.S. Government Money Fund, with rapid growth from 2024 to 2025.
The IMF video argues that tokenization has the potential to enable faster, cheaper, and more programmable markets (but these markets will grow under greater regulatory scrutiny, and governments are prepared to intervene).
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