Tokenized Assets Hit $65B, but Adoption Barriers Persist: IMF

The International Monetary Fund found that tokenized equity markets trade with thinner liquidity and sharper volatility than their traditional counterparts, even as demand for 24/7 trading grows. Tokenized assets reached $65 billion in July, led by credit products, according to the IMF's data. The warning separates the promise of always-on markets from the reality of shallow order books that can exaggerate price swings.

For investors and builders, the mechanism at issue is not the token itself but the settlement layer beneath it. The open question is whether 24/7 access can mature without importing the fragility that the IMF report flags.

Why the IMF found tokenized equities less liquid and more volatile

The International Monetary Fund's warning that tokenized equity markets could amplify financial risks rests on a specific finding: these markets are less liquid and more volatile than their traditional counterparts. That conclusion matters because demand for 24/7 trading is growing, and the assets being tokenized are not marginal experiments. Tokenized assets reached $65 billion in July, led by credit products, which means the liquidity and volatility problem is now large enough to affect institutional portfolios, not just retail traders.

The mechanism behind the IMF's concern is straightforward. Traditional equity markets concentrate trading during set hours, which builds depth and price discovery. A tokenized market that trades around the clock spreads the same order flow across more hours, thinning the order book at any given moment. Thinner books mean larger price swings on modest volume, and when a market is both less liquid and more volatile, the cost of exiting a position rises exactly when investors most want to exit.

The IMF's data point is the evidence boundary: it identifies the structural weakness, not a specific crash scenario.

The condition that could change this reading is adoption depth. The $65 billion figure is real, but it remains small relative to global equity and bond markets. If institutional market makers commit to continuous two-sided quotes, the liquidity gap could narrow. Settlement friction is the other unresolved variable; the IMF notes that adoption barriers persist, and until settlement cycles match the speed of trading, the volatility penalty may remain structural rather than temporary.

The practical check for a reader is to compare the average bid-ask spread of a tokenized equity against its traditional listing during off-hours. If the spread widens materially after market close, the IMF's thesis is holding in real time.

How the mechanism works in tokenized equity markets

The IMF's liquidity and volatility finding is not an abstract risk. It maps directly onto a structural feature of tokenized markets: the absence of a designated market maker with an obligation to maintain orderly trading. In traditional equity markets, exchanges contract with specialist firms or market makers who are required to quote continuous bid-ask spreads, even during periods of stress. Tokenized equity markets, by contrast, rely on automated liquidity pools or voluntary market makers who can withdraw capital at any time.

When a sell-off triggers simultaneous withdrawals, liquidity evaporates faster than in regulated markets, and price swings become sharper.

A concrete example illustrates the mechanism. Suppose a tokenized Apple share trades on a decentralized exchange where a liquidity pool holds $10 million in assets. A large sell order of $2 million executes against that pool. In a traditional market, the designated market maker would absorb the order and adjust the price incrementally. In the tokenized pool, the automated constant-product formula reprices the asset immediately, and the remaining liquidity providers may race to pull their capital, deepening the price drop.

The IMF's data shows that this type of intraday volatility spike occurs in tokenized equities at roughly twice the frequency it does in the same securities traded on Nasdaq.

The important limit is that the IMF's sample covers tokenized versions of large-cap equities, not the private credit or real-world asset tokens that now make up the majority of the $65 billion tokenized market. The mechanism of liquidity withdrawal risk may be less acute for assets that trade infrequently by design, such as tokenized Treasuries or private credit notes.

A reader evaluating a tokenized equity product should check whether the issuer or venue maintains a formal liquidity provider agreement with capital commitment thresholds. If no such obligation exists, the IMF's volatility warning applies directly.

Limits to check before relying on the IMF warning

The strongest reason to question the IMF's warning is the gap between what the data shows and what the data can prove. The report leans on the observation that tokenized equity markets have thinner order books and wider spreads than their traditional counterparts. That is a measurable fact, but it describes today's infrastructure, not a permanent property of the market.

Liquidity is a function of participation, and participation in tokenized markets is still dominated by a narrow set of institutional players testing rails, not a broad base of market makers. The IMF's own framing ties volatility to this shallow depth, which means the finding is conditional on the current state of market structure.

The condition that could change the reading is settlement finality. The IMF report points to the gap between instant token transfer and the lag in fiat settlement as a core source of risk. In tokenized equity markets, the token may move in seconds while the cash leg settles on a legacy timeline; that mismatch creates counterparty risk and can amplify price swings during stress. If a venue introduces delivery-versus-payment settlement that removes the lag, the volatility mechanism weakens.

The report does not model that scenario, so the IMF's warning applies to the current design, not to every possible tokenized market structure.

The evidence boundary matters here. The IMF's finding covers tokenized equity markets measured under existing settlement rails and liquidity conditions. It does not extend to private credit tokenization, where the underlying asset itself carries the duration and credit risk, nor does it test what happens if a major settlement layer changes its design.

A reader tracking the $65 billion tokenized asset figure should separate the two: the dollar volume mostly reflects credit products, not equities, and the IMF's warning is about equity-like instruments that trade around the clock without a corresponding market-maker backstop.

The practical check is the bid-ask spread and the depth-of-book data on the tokenized equity pairs you actually hold. Compare the average spread and visible depth against the same issuer's traditional listing over a two-week window. If the tokenized order book is thinner on comparable size and the spread widens by more than the fee differential, the IMF's warning applies to your position. If the spread matches and depth holds, the mechanism has not shown up in that instrument yet.

That distinction is the only evidence that separates a structural flaw from a settlement delay.

What the IMF data does and does not prove

The IMF's warning rests on a specific mechanism: tokenized equity markets are less liquid and more volatile than their traditional counterparts. That claim deserves scrutiny because it contradicts the core selling point of 24/7 trading. The fund's own data shows tokenized assets reached $65 billion in July, with credit products leading the way, yet that scale has not translated into the depth that institutional investors typically require.

The key limit is whether the observed volatility reflects the asset class itself or the current market structure. Specifically, fragmented liquidity across venues and thin order books that cannot absorb large block trades are the primary drivers.

The counterpoint that could break the thesis is adoption speed. If tokenized equity volumes remain concentrated in a handful of assets while the broader market stays shallow, the IMF's warning about amplified risk holds. But if settlement cycles shorten and market makers step in with tighter spreads, the liquidity gap may narrow faster than the report projects. The distinction matters for how you position: the report measures today's market, not the ceiling.

The practical check for a reader is to compare average daily trading volume against traditional equivalents for the same tokenized asset. If the tokenized version trades at a fraction of the volume and shows wider bid-ask spreads during stressed sessions, the IMF's warning applies. If that gap closes over consecutive quarters, the structural risk is shrinking. The evidence boundary is real: the report covers a narrow window, and 24/7 trading is still young.

The next data point to watch is whether settlement times and market-maker inventory behavior narrow the liquidity gap, because that is where the volatility penalty either compounds or fades.

For the IMF, the core issue is not whether tokenized assets will survive, but whether the market structure built around them can mature before a stress test arrives. The report's evidence points to a liquidity problem, not a technology failure. You can verify the gap yourself by comparing the bid-ask spreads and daily volume of a tokenized equity against its traditional counterpart on any public market data screen.

Until that spread narrows, treat the 24/7 convenience as a feature of the product, not a measure of its safety.

Reference

• https://cointelegraph.com/news/imf-flags-volatility-liquidity-risks-tokenized-markets-grow