Key Insights:
- IMF says RWA tokenization faces four growth barriers as tokenized assets hit $65B.
- Around 80% of tokenized equity trades analyzed by the IMF involved fewer than one share.
- IMF urges safeguards against liquidity runs and contagion as tokenization grows.
RWA tokenization faces four major growth barriers as tokenized assets reach $65 billion, according to the International Monetary Fund.
The IMF identified legal certainty, regulatory clarity, compatibility, and safe settlement assets as requirements for market expansion. It said these constraints persist despite growing investor interest in trading outside regular hours and buying fractions of shares.
The findings appear in an analytical chapter of the IMF’s latest Global Financial Stability Report. The fund compared the sector’s size with approximately $300 trillion in traditional capital market assets.
It also reported that issuance focuses primarily in the United States and a few major offshore jurisdictions.
IMF Identifies Four Barriers to RWA Tokenization
The first barrier concerns whether investors can uphold the legal rights that tokenized assets represent. The IMF said countries should clarify those rights to provide legal certainty. It separately urged regulators to explain how existing rules apply to new ledgers and market functions.
The third constraint involves interoperability, or the ability of different platforms to connect. According to the IMF, trading remains divided across networks, platforms, and settlement arrangements, dividing liquidity among separate venues.
The fourth constraint concerns settlement assets, with the fund highlighting safe, widely accepted forms of money.
The IMF described these four constraints as mutually strengthening barriers to further growth. It said divided platforms and the absence of common settlement assets weaken the network effects that could support expansion.
Trading Data Shows Demand for Access and Fractional Shares
Despite these barriers, the IMF reported that investors value features that are available on tokenized markets.
More than half of trading in its analysis occurred outside traditional market hours. Around 80% of the tokenized equity trades examined involved amounts smaller than one share.
The fund said fractional ownership allows retail investors to participate with lower entry costs. Its review also found that conventional equity prices measured overnight tokenized equity returns shortly after markets opened. The IMF said this showed that both markets responded to similar information.
However, the fund reported that tokenized markets remain inactive and more volatile than their traditional counterparts.
It said fragmentation further weakens liquidity, hinders efficient price formation, and contributes to price deviations. These limitations remain alongside the trading features that investors already use.
IMF Urges Safeguards as Tokenized Markets Expand
Repurchase agreements account for most tokenized activity, averaging around $300 billion to $350 billion in daily transactions, the IMF said.
These short-term loans involve government bond collateral and an agreement to reverse the transaction later. The fund compared that activity with approximately $13 trillion in daily U.S. repo market volume.
RWA tokenization can combine issuance, trading, settlement, and servicing on distributed programmable ledgers, according to the report.
It can also compress processes that institutions currently perform in order, although the IMF said much of this possibility remains unrealized. The fund warned that greater scale could amplify fire sales, liquidity runs, and contagion through interconnectedness and leverage.
The IMF noted that existing sequential processes add costs while providing safety buffers and supporting liquidity management. It said those protections would mostly disappear in a fully tokenized environment.
For RWA tokenization to expand safely, the IMF called for regulation that treats similar activities consistently regardless of technology.
It also urged connections between tokenized platforms and traditional financial systems. Authorities should monitor emerging vulnerabilities and maintain safeguards as interconnectedness, leverage, and liquidity risks evolve, the fund said.
