The International Monetary Fund (IMF) has warned that tokenized stocks remain significantly less liquid and more volatile than their traditional counterparts, despite growing investor demand for blockchain-based versions of publicly traded equities.
The findings were contained in the IMF’s latest analysis of tokenized equities, which examined trading activity across multiple platforms and found that investors are increasingly using blockchain-based stocks for round-the-clock trading and fractional ownership.
Tokenized Stocks Are More Volatile
The IMF found that tokenized equities were approximately 1.5 times more volatile than the traditional stocks they track.
Tokenized stocks are blockchain-based representations of equities that allow investors to gain exposure to companies through digital tokens. Depending on the structure, these products can provide access to stocks outside the normal operating hours of traditional stock exchanges.
However, the IMF's analysis found that the additional trading flexibility comes with market-quality challenges, particularly thinner liquidity and greater price fluctuations.
The difference is particularly pronounced on decentralised exchanges, where limited trading depth can cause prices to move more sharply when investors buy or sell.
More Than Half of Trading Happens Outside Market Hours
Despite the risks, the IMF found evidence of genuine demand for tokenized equities.
More than 50 per cent of tokenized stock trading takes place outside regular US stock-market hours, demonstrating that investors are using the technology to trade when traditional exchanges are closed.
Traditional US stock exchanges generally operate during set weekday trading hours, while blockchain-based markets can operate continuously, including overnight and weekend periods.
The IMF said this extended access could be useful for investors who want to respond immediately to news and market developments rather than waiting for traditional exchanges to reopen.
Fractional Investing Drives Activity
Another significant finding was the prevalence of small transactions.
About 80 per cent of tokenized equity trades involved less than one conventional share, according to the IMF's analysis.
The figure points to strong demand for fractional ownership, particularly among retail investors.
Fractional investing allows someone to gain exposure to an expensive stock without purchasing an entire share. For example, an investor can obtain exposure to a company whose traditional share price may be hundreds of dollars without having to commit the full amount required to buy one share.
Tokenization can therefore lower some barriers to accessing financial markets while also allowing trading to continue beyond conventional exchange hours.
Traditional Stocks Still Influence Tokenized Prices
The IMF also found evidence that tokenized markets are not completely disconnected from traditional financial markets.
When US stock markets reopened, traditional shares absorbed between 87 per cent and 99 per cent of the overnight price movements that had occurred in tokenized versions of those equities.
This suggests that price movements in tokenized markets can contain information about developments occurring while traditional exchanges are closed.
At the same time, the relationship creates another potential channel through which volatility could move between blockchain-based markets and conventional financial markets.
Market Remains Relatively Small
Despite the rapid growth of tokenization, the market for tokenized equities remains small compared with traditional global stock markets.
The IMF estimated the tokenized stock market at approximately $2.3 billion, while the broader tokenized real-world asset market was valued at about $65 billion as of July 2026.
The tokenized equity market is also concentrated among a relatively small number of issuers and platforms.
The IMF's research examined some of the most actively traded tokenized US equities, including products providing exposure to companies such as Tesla and Nvidia, as well as major stock indexes.
Researchers studied trading activity across 11 venues over 365 days to assess how tokenized equities behave compared with their traditional equivalents.
Liquidity Remains a Major Challenge
Liquidity is one of the central concerns identified by the IMF.
A highly liquid market allows investors to buy or sell significant amounts of an asset without substantially affecting its price. Tokenized equities, particularly those traded on decentralised platforms, can have much thinner order books.
That means relatively small transactions can sometimes produce larger price movements.
The problem can become more significant outside traditional market hours, when fewer participants are available to trade.
The IMF's findings therefore suggest that the ability to trade stocks 24 hours a day does not automatically mean that investors will have the same level of liquidity available during conventional exchange hours.
Regulators Face New Challenges
The growth of tokenized equities is also creating new questions for regulators.
Traditional stock markets operate within established frameworks covering ownership, custody, settlement, market surveillance and investor protection. Blockchain-based markets can operate across different platforms and jurisdictions, creating additional complications.
The IMF has previously noted that tokenization can make financial transactions faster and more programmable, but warned that this can also shift risks toward technology infrastructure, smart contracts and other digital systems.
In its latest analysis, the IMF suggested that regulators should pay closer attention to the risks associated with continuous trading, including the possibility of sharp price movements when traditional markets are closed.
Researchers also pointed to the potential use of circuit breakers and other safeguards for 24-hour tokenized markets.
Tokenization Continues to Expand
The IMF's warning comes as major financial and technology companies continue to develop tokenized securities.
Recent initiatives have brought blockchain-based versions of major US stocks to investors, while exchanges and financial infrastructure providers are exploring ways to integrate tokenization with conventional markets.
For example, Securitize announced in October that it had launched blockchain-based versions of shares including Apple, Nvidia and Microsoft, with the tokens backed by the underlying stocks.
The expansion suggests that tokenization is moving beyond an experimental concept and increasingly becoming part of the broader financial-market infrastructure.
The IMF, however, has stressed that the technology's benefits must be considered alongside its risks.
For investors, tokenized stocks can provide advantages such as extended trading hours, fractional ownership and potentially faster settlement. But the IMF's findings show that these benefits currently coexist with higher volatility, weaker liquidity and regulatory challenges.
The market remains relatively small, meaning the IMF considers systemic risks limited for now. Nevertheless, continued growth and closer connections between tokenized and traditional financial markets could make these issues increasingly important for regulators and investors.
