Tokenised Money: A New Wave for Global Finance

Tokenisation – the practice of putting money and contracts on shared digital ledgers – promises to speed up trades and cut costs by allowing buying, selling, and paying to happen in real time. However, it also transfers risk from banks to the companies that run these digital platforms.

Current Market Reality

• Slow, step‑by‑step processes: orders → match → settle → verify.
• Delays act as a safety net, limiting mistakes and giving regulators time to intervene when markets wobble.

Tokenisation’s Promise

• Smart contracts could complete all steps in seconds, delivering lightning‑fast settlement.
• This speed might expose problems faster than regulators can respond.

Three New Kinds of Digital Money

1. Tokenised bank deposits – retain existing banking rules.
2. Stablecoins – claim a fixed value but require robust reserves for reliability.
3. Tokenised central‑bank reserves – let governments control money while leveraging new tech.

The Future of Banks

• Still exist, but transformed: code handles deposits, loans, interest calculation, collateral checks, and record‑keeping.
• Potential benefits: early detection of market trouble.
• Risks: sudden liquidity crunches if the system fails.

24‑Hour Digital Settlement

• Old “business‑day” logic becomes obsolete.
• Central banks and markets must devise new liquidity support mechanisms to keep pace with automated trades.

Regulatory Implications

• Code supervision: regulators must monitor smart contracts, not just human operators.
• A buggy contract could collapse an entire system.

Impact on Emerging Economies

• Faster payments and easier market access.
• Rapid cross‑border transfers could bypass national safeguards, giving governments less time to act.

The Path Forward

• Strong local rules and global cooperation are essential to harness technology for public benefit rather than creating new risks.
• Outcomes hinge on:
• Who controls digital money.
• Interoperability between systems.
• Clear legal definitions of ownership on ledgers.

The IMF envisions a blend of public safety nets and private innovation to build a stable, inclusive global finance system.