IMF Says Tokenized Stocks Are 1.5 Times More Volatile Than Traditional Shares, With Thinner Liquidity

Tokenized stocks offer advantages such as 24-hour trading and fractional investing, but they are more volatile than traditional shares and suffer from thinner liquidity, according to an International Monetary Fund analysis.

CoinDesk reported on Oct. 11 that the IMF, in its latest Global Financial Stability Report, analyzed the five most actively traded U.S. tokenized stocks, including Tesla (TSLA), Nvidia (NVDA) and Alphabet (GOOG). It found that tokenized stocks were about 1.5 times as volatile as conventional shares, while market liquidity was markedly lower.

The report did find benefits for investor access. More than half of tokenized stock trading took place outside regular U.S. market hours, and about 80% of all trades were for less than one share. More than 85% of price moves during overnight trading were reflected in traditional share prices within five minutes of the U.S. market open. The IMF said this showed investors are actively using 24-hour trading and fractional investing.

The tokenized asset market is growing rapidly, but it remains in an early stage compared with the broader financial system. The IMF estimated the market for tokenized real-world assets at about $65 billion as of July 31. Of that, tokenized stocks accounted for only about $2.3 billion. That is still minor compared with the roughly $160 trillion global stock market capitalization recorded last year.

The IMF said tokenization could automate functions such as dividend payments and collateral transfers, while reducing the cost and time required to process trades. At the same time, it identified limits including a lack of compatibility among issuers, investors, trading platforms and settlement systems. It also warned that the combination of 24-hour trading, automated margin calls and forced liquidations could allow market stress to spread quickly.

The IMF said the tokenized market is still too small to pose a broad risk to the financial system. Even so, it stressed the need to establish legal standards for asset ownership, liquidity safeguards, interoperability across platforms and settlement arrangements before the market expands in earnest.