The International Monetary Fund said on October 8 that asset tokenization lowers trading costs and settlement times but creates new vulnerabilities in operations and market infrastructure, with the tokenized real-world asset market reaching roughly $65 billion as of end-July.

The IMF presented Chapter 3 of its October Global Financial Stability Report, titled "The Expansion of Tokenization: New Efficiencies and Vulnerabilities," at a Bank of Korea annex building in Seoul. The fund is releasing the report's analytical chapters in stages ahead of the IMF-World Bank annual meetings, which open in Bangkok on October 12.

The GFSR, published twice a year, is the IMF's flagship financial stability assessment.

How large is the tokenized asset market?

The report put tokenized real-world assets at about $65 billion as of the end of July. The composition is heavily weighted toward fixed income:

• Bonds, asset-backed securities and money market funds accounted for $48 billion
• Tokenized equities stood at $2.3 billion
• Tokenized repurchase agreement transactions rose to $371 billion on a 30-day moving average basis

In tokenized U.S. equity markets, more than half of trading volume was executed outside regular market hours and roughly 80% of trades were fractional, involving less than one share. Realized volatility, however, ran about 1.5 times higher than in traditional markets, and liquidity on decentralized exchanges deteriorated.

What risks does the IMF identify?

The IMF said tokenization is less likely to eliminate existing financial risks than to change the paths along which those risks build up and spread. Greater reliance on smart contracts and oracles raises the importance of operational, governance and infrastructure risks. Collateral reuse and automated liquidation mechanisms can amplify liquidity, leverage and contagion risks.

The report cited four factors that could constrain growth in tokenized markets:

• Legal certainty
• Regulatory clarity
• Interoperability
• Safe settlement assets

For securities settlement in particular, the IMF recommended central bank money as the guiding principle. Using private deposit tokens or stablecoins as settlement assets could heighten contagion and concentration risks on top of the issuer's credit and liquidity risks, the fund said. Bridges linking different distributed ledgers could also widen the attack surface exposed to cyberattacks.

Why does this matter for Korea?

Much of the analysis bears directly on South Korea, which is set to launch its token securities framework in February. The Financial Services Commission plans to introduce token securities initially for institutional investors before extending them to retail investors, and then to build on-chain settlement infrastructure using instruments such as stablecoins — precisely the settlement-asset category the IMF flagged.

The IMF assessed the systemic risk tokenization currently poses to the financial system as limited. But if the market spreads widely, the fund said the central challenge will be whether existing financial market infrastructure and legal and regulatory frameworks can absorb the new risks.

For Korean policymakers, that question becomes concrete when the FSC's token securities rollout begins in February, and the IMF's settlement-asset guidance is likely to shape how Seoul designs its on-chain infrastructure before retail access opens.