The International Monetary Fund (IMF) has said the rapid rise of tokenization is set to fundamentally reshape the architecture of global financial markets, but warned that blockchain technology will not eliminate the regulated institutions that underpin the financial system.

In a new working paper titled ‘The Evolution of Financial Market Infrastructures in a Tokenized Economy: Exploring Blockchain Implementation Options for Issuance, Central Clearing, Settlement, and Reporting’, the IMF argued that while distributed ledger technology (DLT) and smart contracts can automate a growing number of financial processes, legal entities and regulated market infrastructures will remain indispensable for governance, compliance, risk management and financial stability.

The paper, prepared by IMF researchers Yaiza Cabedo, Tommaso Mancini-Griffoli, Fabian Schär and Nicolas Zhang, describes tokenization as the most significant technological shift in financial market infrastructure since securities moved from paper certificates to electronic records decades ago.

According to the IMF, the technology has the potential to modernize virtually every stage of financial transactions, including the issuance, trading, clearing, settlement, and reporting of financial assets.

“Tokenization has the potential to reshape Financial Market Infrastructures more profoundly than any technological shift since securities dematerialization,” the paper stated.

The report explained that tokenization allows ownership rights over financial assets to be represented digitally on blockchain networks, enabling transactions to be executed through programmable smart contracts rather than multiple manual processes involving intermediaries.

By operating on a shared digital ledger, financial institutions could significantly reduce operational costs associated with reconciliations, record-keeping, collateral management, and settlement.

The IMF said programmable financial infrastructure could streamline delivery-versus-payment settlements, automate collateral movements, improve liquidity management and shorten settlement cycles, potentially moving many markets closer to real-time settlement.

The technology could also improve transparency by creating a single shared source of transaction records that market participants can access simultaneously, reducing operational frictions that currently arise from maintaining separate databases across institutions.

However, the IMF cautioned that technological automation has clear limits.

While smart contracts can execute predefined instructions with speed and precision, they cannot replace the institutional judgment required to manage financial crises, oversee systemic risks or ensure legal accountability.

According to the report, critical functions such as risk governance, margin calibration, default management, dispute resolution, business continuity planning, supervisory intervention, and regulatory compliance will continue to require human oversight and legally recognized institutions.

The IMF believes tokenization will fundamentally change how they operate, rather than replacing financial market infrastructures.  The institution expects the future financial system to evolve toward hybrid models that combine blockchain-based automation with traditional institutional governance.

Under such arrangements, smart contracts would increasingly manage routine operational processes, while regulated institutions would continue supervising compliance, enforcing legal rights, managing financial risks and intervening during periods of market stress.

The report noted that hybrid systems will remain particularly important in jurisdictions where blockchain-based settlements lack full legal recognition or where ownership rights still depend on traditional legal frameworks outside distributed ledger systems.

The IMF also pointed to the growing complexity of transactions that span multiple blockchain networks, arguing that interoperability challenges mean regulated institutions will continue to play a central coordinating role.

Beyond operational improvements, the report identified several emerging risks associated with tokenized financial markets. Among them are vulnerabilities in smart contract programming, concentration of governance power within blockchain protocols, dependence on external data providers known as oracles, privacy concerns arising from shared ledgers, and fragmentation across competing blockchain ecosystems.

These risks, the IMF argued, make regulatory oversight even more important as financial markets adopt blockchain technologies at scale.

The report therefore urged policymakers to focus less on whether tokenization should replace existing financial infrastructure and more on determining which functions can safely be automated and which require ongoing institutional oversight. According to the IMF, the central policy question has shifted from whether financial market infrastructures will remain relevant to how existing institutions should evolve alongside blockchain-enabled financial systems.

The findings come as governments, regulators and central banks around the world accelerate efforts to integrate tokenization into mainstream finance.

Financial institutions now see tokenization as a way to improve market efficiency, reduce settlement costs, unlock liquidity and facilitate faster cross-border transactions, particularly in traditionally fragmented capital markets.

Central banks are also studying how tokenized deposits and central bank digital currencies could interact with tokenized securities to enable programmable financial ecosystems.

The report is particularly relevant for emerging markets such as Nigeria, where regulators have recently expanded oversight of digital assets.

Nigeria’s Securities and Exchange Commission (SEC) has tightened supervision of virtual asset service providers through its regulatory incubation programme while simultaneously preparing the market for broader digital asset adoption.

The country’s regulatory framework also took a major step forward following President Bola Ahmed Tinubu’s signing of the Investment and Securities Act (ISA) 2025.

The legislation, which repealed the Investments and Securities Act of 2007, modernizes Nigeria’s capital market laws and, for the first time, explicitly recognizes digital assets as securities where they function as investment instruments.

The classification places tokenized financial products, including tokenized equities and investment-linked digital assets, squarely within the SEC’s regulatory jurisdiction.

The IMF’s conclusions reinforce the direction many regulators are taking by recognizing that while blockchain technology can automate financial processes, legal certainty and institutional accountability remain essential for investor protection and market stability.

Financial market infrastructures—including payment systems, securities depositories, central counterparties, clearing houses, settlement systems and trade repositories—are therefore expected to evolve rather than disappear as tokenization gains wider adoption.

For financial institutions, the report signals that future competitiveness will depend not simply on adopting blockchain technology but on successfully integrating programmable infrastructure with robust governance and regulatory compliance.

The 2026 FIFA World Cup has become the biggest catalyst yet for the rapidly expanding prediction market industry, driving record trading activity across leading event-contract platforms as millions of users wager on match outcomes, tournament winners and related events.

The month-long football spectacle, widely forecast to become the largest betting event in history, pushed trading volumes on platforms such as Kalshi, Polymarket and Robinhood-backed Rothera to unprecedented levels, highlighting the growing mainstream adoption of regulated prediction markets beyond politics and macroeconomic events.

Data compiled by Dune Analytics, which was first published by CNBC, showed that Kalshi recorded more than $31 billion in notional trading volume in June, representing a surge of more than 70% from $17.9 billion recorded in May. The platform has consistently generated more than $1 billion in daily trading volume since the World Cup kicked off on June 11, underscoring the tournament’s role in transforming sports-related event contracts into one of the fastest-growing segments of the alternative trading market.

International rival Polymarket also enjoyed its strongest month on record. Its global platform processed more than $10.8 billion in notional trading volume during June, reversing the slowdown experienced in April and May. Meanwhile, Polymarket’s U.S. platform recorded more than $3.5 billion in trading volume, almost doubling May’s $1.77 billion.

The surge demonstrates how prediction markets are rapidly evolving into mainstream financial products, with sports increasingly joining elections, inflation, interest rates and geopolitical developments as major drivers of trading activity.

The World Cup has become an ideal testing ground because it combines massive global audiences, clearly defined outcomes and continuous events over several weeks, generating sustained user engagement rather than short-lived spikes associated with one-off political or economic announcements.

The excitement surrounding the tournament has also provided an early boost for Rothera, the prediction market joint venture established by Susquehanna International Group and Robinhood. The platform, which officially launched in June, processed approximately $2 billion in notional trading volume during its debut month after Robinhood began routing selected World Cup event contracts through the exchange.

According to Bank of America, Rothera has already captured around 7% of the U.S. prediction market, an impressive start for a newcomer competing against more established players.

The knockout stages continue to attract enormous trading activity. Ahead of the United States’ Round of 16 clash against Belgium on Monday night, traders had already exchanged more than $64 million worth of contracts on Kalshi and approximately $122 million on Polymarket relating to whether Team USA would ultimately win the World Cup.

Despite the heavy trading, market pricing suggested optimism remained limited. Kalshi assigned the United States just a 4.3% probability of lifting the trophy, while Polymarket’s implied odds were even lower at 3%, illustrating how prediction markets continuously incorporate collective expectations into contract pricing.

To capitalize on the football frenzy, platforms have aggressively competed for users through marketing campaigns and promotional incentives.

Polymarket launched a global competition offering up to $2 million to participants capable of predicting a perfect World Cup knockout bracket, while Kalshi prominently featured “Trade the World Cup” across its mobile application to attract sports-focused traders.

Beyond headline trading volumes, the tournament has also boosted open interest across the industry. Open interest, which measures the total value of outstanding contracts yet to be settled, climbed above $1 billion on Kalshi, indicating that users are maintaining larger positions throughout the competition rather than simply placing short-term bets.

Polymarket’s international platform recorded open interest approaching $400 million, remaining near historically elevated levels despite recent fluctuations in trading activity.

Industry observers believe the World Cup represents far more than a successful sporting event for prediction markets. It is widely viewed as the industry’s most significant operational stress test to date, demonstrating whether exchanges can efficiently process billions of dollars in transactions while maintaining orderly markets, accurate pricing and effective safeguards against manipulation.

That performance is attracting close scrutiny from regulators, institutional investors, and financial firms evaluating whether prediction markets can mature into a permanent component of global financial infrastructure.

Asaf Meir, Chief Executive Officer of market integrity firm Solidus Labs, which partners with Kalshi, said the tournament represents a defining moment for the industry. According to Meir, regulators and institutions are increasingly asking whether prediction markets have become sufficiently mature, liquid, and secure to support sustained high-volume trading without compromising market integrity.

“The World Cup is such a huge pressure test to see whether indeed prediction markets are able to deliver their word on maintaining a level playing field for all investors for a long period of time in a sustained high-volume environment,” he said.

Unlike traditional sportsbooks, prediction markets are taking a position as financial exchanges where participants trade contracts based on the probability of future events rather than placing conventional bets. That distinction has attracted growing interest from hedge funds, quantitative traders and retail investors seeking alternative ways to express market views.

Sports have dominated activity during the World Cup, but market participants expect attention to shift back toward contracts linked to inflation, monetary policy, corporate earnings, elections, and geopolitical developments once the tournament concludes.