According to Woofun AI, the latest “Global Financial Stability Report” released by the International Monetary Fund was co-authored by Gonzalo Fernandez Dionis, Caio Ferreira, Mindaugas Leika, and Athanasios Vamvakidis. It clearly determines that the core value of tokenization depends on rule-building rather than simple technological iteration. The report emphasizes that although tokenization theoretically has the potential to restructure the underlying logic of the financial market, its actual implementation is still facing serious challenges. Although investors have shown interest in some of its core functions, the overall market size is still small and highly fragmented, and there is an urgent need to unleash its true potential through system improvement.
Judging from the size and structure of the market, the tokenization business is currently extremely unbalanced. The vast majority of transactions are concentrated in the repurchase agreement market, that is, in the field of short-term loans where government bonds are used as collateral, and both parties agree to reverse redeem assets at a specific time in the future.
The average daily transaction volume in this segment is around $300-350 billion, fully demonstrating the appeal of tokenization in terms of collateral management efficiency. By contrast, the total amount of tokenized assets covering other types of credit, money market funds, and stocks is only around $65 billion.
Despite the rapid growth rate, it is still insignificant compared to the traditional financial system: the average size of the traditional US repurchase market is as high as 13 trillion US dollars per day, and the total assets of the global capital market reach 300 trillion US dollars. On the distribution side, tokenized assets are highly concentrated in the US and a few major offshore jurisdictions; on the trading side, the business is scattered across a large number of platforms, networks, and settlement systems, and fragmentation is remarkable.
Data compiled by Woofun AI shows that this structural contradiction between concentrated distribution and scattered transactions makes it difficult for the market to form a unified liquidity pool, further increasing the difficulty of price discovery.
In terms of functional performance, tokenization did show some highlights, but it also revealed deep liquidity difficulties. More than half of transactions take place outside of traditional trading hours, confirming that there is a real demand for round-the-clock trading in the market. At the same time, the fragmented ownership mechanism drastically lowered the entry threshold, enabling ordinary retail investors to buy less than 1 share. In the tokenized stock transactions we analyzed, about 80% of transactions were less than 1 share.
It is worth noting that overnight gains from tokenized stocks are quickly reflected in traditional stock prices after the traditional market opens, indicating that the two markets receive the same market information, and the tokenized market's nighttime price signals are of reference significance for traditional trading. However, the current tokenized market is less liquid, and the volatility is higher than the corresponding traditional market. Fragmentation brought about by multiple networks and multiple trading platforms further erodes liquidity, hampers effective price formation, and causes price deviation. Platform fragmentation, lack of interoperability, and lack of common settlement assets have weakened the network effects that tokenization should enjoy.
The value of a tokenized ecosystem depends on the number of assets, investors, and settlement tools connected to it. Only when the network continues to develop and integrate will benefits such as liquidity, operational efficiency, and composability increase significantly. Currently, four interrelated factors constrain its development include legal certainty, regulatory clarity, interoperability, and the availability of settlement assets. Investors need legal protection to confirm that the rights corresponding to tokenized assets are judicially enforceable; regulators need to clarify how existing regulations apply to new ledgers and market businesses; platforms must interoperate to avoid becoming isolated liquidity silos; and the settlement process must rely on secure and widely accepted monetary instruments.
As scale expands, risk transmission mechanisms are also changing. In the early stages of market development, technology and infrastructure risks were prominent. At the same time, some characteristics of tokenization may open up new risk transmission paths and amplify traditional financial risks, such as sales, liquidity congestion, and risk transmission caused by higher correlation and leverage. In traditional finance, messaging, transactions, delayed settlement, and reconciliation are completed in sequence. Although these processes cause friction and costs, they also provide risk buffers, security guarantees, and liquidity management methods; in an ideal environment of complete tokenization, most of these buffering mechanisms will disappear. Therefore, the challenge facing policymakers is to create conditions for tokenization to develop safely and efficiently. Adhering to the principle of technology neutrality is essential. Countries should clarify the legal rights corresponding to tokenized assets, ensure that similar businesses are consistently supervised regardless of the technology used, and promote interoperability between tokenized platforms and traditional financial systems.
At the same time, it is necessary to continuously monitor emerging risks, including rising correlation, leverage and liquidity risks. As the market expands, safeguard measures must also be followed up simultaneously. The future of tokenization depends more on whether policies can guarantee market depth, build trust, and improve risk control, not just the possibilities of technology itself.