IMF Flags Volatility in Tokenized Stocks as Nasdaq Presses Ahead With Tokenization Plans

The International Monetary Fund has put numbers on the risks of tokenized equities just as NDAQ pushes to bring them into mainstream markets. A chapter of the IMF's October Global Financial Stability Report, released Oct. 8, found that tokenized stocks trade with higher volatility than traditional shares, about 1.5 times the realized volatility across the products studied, and are significantly less liquid, which could make a market shock harder to contain.

The sample is small. It covered five products worth about $345 million, roughly 15% of a tokenized-stock market of about $2.3 billion, and the Fund judged current systemic risk to be limited. More than half of the trading happened outside regular hours and about 80% of trades were for less than one share, a pattern the IMF reads as retail demand. It warned that automated margin calls and around-the-clock trading could speed up liquidations under stress.

Nasdaq is moving ahead. CEO Adena Friedman told CNBC at TOKEN2049 in Singapore that tokenization could free up "tens of billions of dollars" in collateral, while cautioning that "not every asset is liquid enough to support a 24/7 environment". The SEC approved Nasdaq's rule change to trade tokenized securities on March 18, the exchange is targeting a 23-hour trading session in December, and it invested $100 million in Kraken parent Payward in September.

Not everyone sees a smooth path. TD Securities warned in an April note that Nasdaq's plan, particularly an offshore venue with Kraken that would not be open to U.S. participants, could create "two systems" with price discovery outside the consolidated tape. A Barron's feature this week examined why Wall Street is tokenizing stocks and other assets. The full IMF report is due Oct. 13, and Nasdaq's next milestones are its extended trading session and the launch of tokenized securities.