According to the International Monetary Fund, when assets, such as stocks, bonds and bank deposits, go up the chain, transactions and settlements can be significantly faster and costs are expected to decline. But the faster the process, the less time the financial system has left for a wind and regulatory response.
Trade speed compression buffer
According to Tobias Adrian, head of the IMF Ministry of Monetary and Capital Markets, traditional financial transactions usually take two days or longer to be executed, liquidated, collected and reconciled. Currencyized assets can complete the process in seconds.
According to the IMF, these compressed periods are not only efficiency losses but also a buffer. In the event of market fluctuations, code errors or automated sales, the risk may spread in a shorter period of time, and the intervention window shrinks.
Risk or concentration to platform and code
According to the article, real-time liquidity requirements and automatic additional collateral may allow pressure to be transmitted more quickly. Some of the risks previously carried over by individual agency balance sheets may also shift to platform infrastructure and smart contract codes.
The IMF also cautioned that monetization activities may focus on a few large platforms. If transaction, settlement and collateral management all depend on the same type of infrastructure, the impact of governance failures or technical failures will be greater.
Cross-border movement and legal issues to be addressed
At the same time, the IMF recognizes the efficiency advantages of monetization. The monetization of bank deposits, the securitization of monetized coins and the central bank reserve for monetization have the opportunity to work together as a clearing asset on the same book, and high-quality assets can be transferred more quickly across the platform as collateral.
However, the IMF believes that the existing regulatory framework is still based on a more slow traditional market. The market needs to be clear as to whether the monetization record represents the final ownership, whether the finality of the settlement is recognized by law and which jurisdiction law applies to cross-border transactions.
For emerging markets and developing economies, the IMF is particularly concerned about the pressures of rapid cross-border capital flows, including capital surges, increased currency substitution and the risk of currency sovereignty erosion.