The International Monetary Fund (IMF) has published a new paper warning that tokenized finance causes stress events to unfold faster than in traditional systems, leaving less time for intervention. It also highlighted risks associated with stablecoins, which it argued resemble money market funds (MMFs) more than digital money and could be “vulnerable to confidence-driven runs in adverse conditions.”
Written by economist Tobias Adrian, Financial Counselor and Director of the IMF’s Monetary and Capital Markets Department, the report suggested that tokenization “represents a profound reconfiguration of the financial system’s core infrastructure.”
It is therefore necessary, wrote Adrian, to anchor digital finance in public trust “through clear policy frameworks and safe settlement assets, robust governance of code, legal certainty, and international coordination.”
He warned that if such measures are not taken, “tokenization risks amplifying financial instability through speed, concentration, and fragmentation.”
In this regard, the paper particularly highlighted stablecoins as a potential source of instability, due to their increasing global popularity and questionable ability to maintain par convertibility.
Stablecoins, or sCBDC
Last year, stablecoin payments volume reached $390 billion annually, based on December 2025 data from business management consultant firm McKinsey & Company.
According to the IMF, the appeal of stablecoins lies in “programmability, global reach, and continuous availability.”
However, it went on to argue that, due to the questionable ability of leading private issuers to ensure redemption at par by maintaining transparent and liquid reserves, stablecoins could be “vulnerable to confidence-driven runs” in adverse conditions.
“Using stablecoins as settlement assets can increase efficiency in normal times but may amplify stress if confidence deteriorates,” said the paper.
This was the case in the well-publicized May 2022 collapse of TerraUSD, which wiped out a market capitalization of around $45 billion and started a domino effect in the rest of the digital currency market, plunging the price of other assets, including BTC, and leading to an estimated loss of $300 billion in value across the industry.
For this reason, the IMF paper argued that stablecoins are less akin to fiat currency than they are to MMFs, a type of mutual fund that invests in cash, cash equivalents and short-term debt securities; like MMFs, stablecoins rely on the perceived quality and liquidity of their underlying assets to maintain value, making them vulnerable to sudden loss of confidence and investor runs, unlike central bank money which is backed by sovereign authority and is inherently stable.
In this regard, the paper also contrasted stablecoins with what it referred to as “synthetic central bank digital currency” (sCBDC), which is privately issued digital money fully backed by central bank reserves and issued by regulated entities with direct access to central bank liabilities.
They stand as a kind of midway between stablecoins and CBDCs. With sCBDC, the system is not directly managed by the central bank, as would be the case with standard retail or wholesale CBDCs; rather, a wide range of tasks are outsourced to private companies, such as customer-facing services, innovation, and compliance, while the settlement asset itself remains anchored in central bank money.
“The central bank does not issue digital currency directly to end users, but instead, it provides the ultimate backing that ensures par convertibility and preserves the singleness of money,” explained Adrian. “In this model, the ultimate settlement backstop resides on the public sector balance sheet, rather than on private reserve portfolios.”
The paper argued that stablecoins, without access to central bank reserves, require additional safeguards at the infrastructure level, “including higher liquidity buffers and conservative margining, to compensate for settlement asset risk.”
In contrast, it suggested that sCBDC arrangements offer a closer functional equivalent to wholesale CBDC, supporting atomic settlement, while maintaining the traditional two-tier monetary system.
However, equally, sCBDC may “blur the boundary between public and private moneys, requiring a careful design to avoid undue expansion of central bank balance sheets or competitive distortions.”
In other words, there are benefits and drawbacks to either option, with the distinction having potentially “systemic implications” for tokenized financial market infrastructures.
Ultimately, the IMF paper argued that the policy choice between stablecoins and sCBDC concerns the institutional setup for the ultimate backstop and the conditions under which par convertibility is assured.
“Stablecoins emphasize private initiative and market discipline, whereas sCBDC emphasizes monetary integrity and systemic safety,” read the paper. “As tokenization advances, jurisdictions may adopt hybrid approaches, but preserving clarity about the nature of the settlement asset—and the location of the ultimate backstop—will be essential for financial stability.”
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Cross-border risk
In terms of other considerations around tokenization, Adrian also highlighted the ease with which tokenized assets and money can move across borders, which he argued “heightens the risk of volatile capital flows, rapid currency substitution, and erosion of monetary sovereignty.”
This can be particularly true if privately issued global stablecoins gain traction in economies with weaker currencies or less developed financial systems.
The current stablecoin boom in Argentina is evidence of this, where economic crisis and inflation have undermined trust in the peso, leading many people to use U.S. dollar–denominated stablecoins as a store of value.
According to Adrian, the cross-border, infrastructure-based nature of stablecoins, and of tokenized finance more broadly, “complicates supervisory reach, regulatory perimeter, and crisis management capacity.”
Again, this is particularly true for nations whose monetary policy is at risk of being undermined by foreign-currency-backed, denominated tokens.
Therefore, one of the paper’s core messages was that central banks and regulators must decide whether to act primarily as rule setters, infrastructure providers, or direct participants in tokenized finance.
“If designed and governed appropriately, tokenization can reinforce the foundational principles of the financial system: safety, efficiency, and inclusiveness,” concluded the paper. “The window for shaping the architecture of the tokenized financial system is open, but it will not remain so indefinitely.”
How governments, policymakers, and central banks decide to act will almost certainly impact the future of tokenization, as well as the level of systemic risk the sector poses.
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Source: https://coingeek.com/imf-warns-tokenized-finance-may-raise-crisis-risk/