IMF Warns Tokenization Market Faces Heightened Flash Crash Risk as Global Regulators Move to Tighten Crypto Regulation

COINOTAG News reports, via Cointelegraph, that the IMF has issued a fresh warning on the tokenization frontier. While tokenization can accelerate settlement and lower costs, the IMF cautions it also introduces systemic risk and may amplify the likelihood of a flash crash if automated activity surges. Policymakers worldwide are weighing calibrated regulation to manage this evolving landscape without dampening innovation.

Beyond efficiency gains, the IMF notes that complex smart contracts and automated trading systems can transmit stress across venues, potentially turning localized faults into broader market volatility. Robust risk controls, transparent disclosure, and credible governance standards are presented as critical lines of defense against cascading shocks.

Looking ahead, the IMF expects governments to take a more proactive role in the tokenization space, coordinating cross-border safeguards and capital-adequacy considerations to balance innovation with risk management.