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Global organizations concur that tokenization, in its present developmental phase, does not threaten financial stability. It presents risks akin to those found in traditional finance (TradFi), which can be mitigated through enhanced monitoring of transactions involving tokenized assets and improved regulation of the industry.
The Bank for International Settlements (BIS) and the Financial Stability Board (FSB) have both released reports concerning tokenization technology. These regulatory documents will be discussed at the G20 Finance Ministers’ and Central Bank Governors’ Meeting on 24 October in Washington.
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Both reports underscore the possible advantages of tokenization, highlighting that it entails risks comparable to those in conventional financial systems. Specifically, BIS analysts pointed out that asset tokenization is still uncommon and the technology is not fully explored. Nonetheless, its application is associated with liquidity challenges, credit and operational risks, as well as potential fraud. The FSB report concluded that while these risks exist, tokenization does not present major threats to financial stability but necessitates ongoing oversight.
The BIS analysts further indicated that tokenization could enhance the security and efficiency of financial systems. Consequently, FSB researchers advised that central banks should actively investigate regulatory strategies and foster international collaboration.
During last year’s gathering of G20 finance ministers and central bank governors, the topic of establishing global standards for cryptocurrency market regulation was addressed, with BIS analysts advocating for the prompt introduction of central bank digital currencies (CBDCs). The matter of regulating tokenization technology emerged this year as the RWA market exceeded $12 billion and is projected to expand fiftyfold over the next six years.
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