Imf Warns Tokenized Markets May Deepen Flash Crashes, Says...

Tokenization promises faster and cheaper markets, but the IMF warns that new risks and government intervention will accompany the shift to programmable finance.

The IMF dropped an explanatory video on its X handle today exploring the new phenomenon of tokenized markets.

The international body responsible for ensuring the stability of the global monetary system recognized the advantages of tokenized markets in the video, but warned that they can be prone to flash crashes and are more volatile than traditional markets.

“Tokenization can make financial markets faster and cheaper, but efficiencies from new technologies often come with new risks,” the video said.

The video frames tokenization as the next step in money’s evolution, explaining that tokenization can make it “faster and cheaper to buy, own, and sell assets” by cutting down the long chain of intermediaries.

Instead of relying on clearinghouses and registrars, a tokenized market can automate those functions in code.

According to the IMF, researchers studying early tokenized markets have already “found significant cost savings,” with programmability allowing near‑instant settlement and more efficient collateral use.

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Still, the IMF stresses that those same efficiencies can amplify familiar dangers. Automated trading has “already led to sudden market plunges known as flash crashes,” and the IMF cautioned that tokenized markets, with instantly executed trading, “can be more volatile” than traditional venues.

In stressed conditions, complex chains of smart contracts “written on top of each other” may interact “like falling dominoes,” turning a local problem into a systemic shock.

Source: CoinTelegraph