PANews reported on October 23 that according to The Block, the Financial Stability Board (FSB) released a report on Wednesday saying that institutional financial exploration of tokenization poses little risk to the global financial system, mainly due to the limited adoption of the technology so far. The Financial Stability Board pointed out in the report that initiatives such as BlackRock's BUIDL Fund are still in the early stages and currently help mitigate potential threats to the financial system.
Although the report states that the technology currently poses low risks due to its inability to scale, it finds several financial stability vulnerabilities associated with DLT-based tokenization. The main issues include liquidity mismatch, leverage issues, asset quality, interconnectivity, and operational fragility. The report warns that these risks could be exacerbated if asset tokenization scales up significantly, especially if the industry can resolve interoperability issues and receive clearer regulatory guidance.
The FSB also expressed doubts about the advantages of tokenization, arguing that existing technologies can often achieve similar results without the associated risks. The report outlines various obstacles that hinder widespread adoption, including unclear investor needs, lack of interoperability between DLT platforms, and different legal and regulatory frameworks in different jurisdictions. In addition, the report emphasizes the importance of effective supervision and regulatory measures. The report points out that if these vulnerabilities are not adequately addressed, they may pose financial stability risks as the adoption of tokenization increases.
