Finance and Economics Discussion Series (FEDS)
September 2023 (Revised December 2023)
Tokenization: Overview and Financial Stability Implications
Francesca Carapella, Grace Chuan, Jacob Gerszten, Chelsea Hunter, Nathan Swem
Abstract:
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
DOI: https://doi.org/10.17016/FEDS.2023.060r1
PDF: Full Paper
Original Paper: PDF
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.