September 2023 (Revised December 2023)

Tokenization: Overview and Financial Stability Implications

Francesca Carapella, Grace Chuan, Jacob Gerszten, Chelsea Hunter, Nathan Swem


In this paper we outline tokenization, which is a new and rapidly growing financial innovation in crypto asset markets, and we discuss potential benefits and financial stability implications. Tokenization refers to the process of constructing digital representations (crypto tokens) for non-crypto assets (reference assets).1 As we discuss below, tokenizations create interconnections between the digital asset ecosystem and the traditional financial system. At sufficient scale, tokenized assets could transmit volatility from crypto asset markets to the markets for the crypto token’s reference assets.

Keywords: Financial stability and risk, cryptoassets, financial innovations, interconnections, tokenization


PDF: Full Paper

Original Paper: PDF

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Last Update: December 15, 2023