IMF flags fragmentation risk as assets shift to shared digital ledgers

In a recent blog post, Tobias Adrian, the IMF’s financial counselor and director of the Monetary and Capital Markets Department, said that when financial assets and liabilities are moved onto shared digital ledgers, processes that today occur sequentially will then be executed by software rather than institutional procedures.

He argued that tokenization is a structural change in how finance operates and that it comes with its own risks.

IMF says tokenization brings major risks

Multiple forms of digital money can coexist in tokenized finance: bank deposits, stablecoins and central bank money. Design choices will shape stability and trust. Read our new blog on tokenization: https://t.co/niSfVsSwgf pic.twitter.com/EHprvZVDgJ

— IMF (@IMFNews) July 3, 2026

In an X post, the IMF highlighted that with tokenization, risk could migrate away from the balance sheets of banks and investment funds and onto companies that run tokenized systems.

The IMF body insisted that policies need to be adapted before migration is even considered.

However, Adrian was also worried about which asset would anchor the final settlement in a fully tokenized system. Adrian went ahead and discussed in detail why he thinks all three available options are limited.

Adrian looked at tokenized bank deposits and said that they represent existing bank liabilities and preserve the current regulatory framework. However, he dismissed them because they also require real-time liquidity management around the clock.

Adrian pointed out that Stablecoins offer programmability and wider reach, but dismissed them because they still depend on the quality of their reserves and the resilience of their issuers to maintain their pegged value. 

Adrian also analyzed a third option of tokenized central bank reserves. He said the tokenized central bank reserves remove the credit risk from the settlement layer. However, they require central banks to operate or oversee programmable infrastructure beyond what traditional payment systems demand.
According to the director of the Monetary and Capital Markets Department, none offer a clean solution.

IMF argues against the 24/7 settlement that tokenization promises

Adrian also pointed out that a 24/7 settlement structure poses a problem that regulators have not yet solved. He highlighted that markets have always built their practices around business-day cycles, overnight windows, end-of-day reconciliation, and next-day clearing.

Without these legacy regulations, liquidity may need to be controlled directly on tokenized infrastructure, without proper clarification on who is in control and where moral hazard sits.

Adrian clarified that tokenization indeed removes friction, but in return, it also does away with important buffers currently built into the system.

The IMF also said that the market must know whether a tokenized record is a final proof of ownership and is legally recognized. The regulations must also clearly state which jurisdiction the law applies in a dispute.

The IMF warned that tokenization will remain broken rather than become the backbone of global finance, without clarifying the legal rules governing it.

The financial body also argued that in developing countries, cross-border tokenized flows increase the risk of volatile capital movements, potentially destabilizing local currencies.

U.S. regulators are already moving to apply existing securities rules to tokenized assets. The regulators are debating pathways, and major financial institutions are building out tokenization infrastructure.