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IMF Explores Tokenized Reserves

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# IMF Explores Tokenized Reserves: Central Banks’ Path to Innovating Money in a Digital World

As central banks worldwide grapple with the rise of blockchain and tokenization, a new IMF working paper dives deep into one of the most intriguing frontiers: tokenized reserves. Titled **”Central Bank Exploration of Tokenized Reserves”**, the paper—authored by Tansaya Kunaratskul, Ashley Lannquist, André Reslow, and Nicolas Xuan-Yi Zhang—offers a comprehensive roadmap for how central banks can adapt their core liabilities to tokenized ecosystems without sacrificing safety or control. Published in November 2025 as part of the IMF’s Fintech Notes series (2025/011), it arrives amid surging interest in digital finance, with 75% of surveyed central banks eyeing wholesale central bank digital currencies (wCBDCs) as a tool to preserve the primacy of central bank money.

### The Promise and Perils of Tokenized Reserves
Tokenized reserves represent direct liabilities of central banks issued on distributed ledger technology (DLT), accessible only to vetted financial institutions. Unlike retail-focused CBDCs, these are geared toward wholesale markets, aiming to supercharge efficiency in payments and settlements. The authors argue that in a tokenized economy—where assets like bonds or real estate are digitized—central bank money must evolve to remain the “risk-free” settlement anchor.

Key objectives include:
– **Preserving the “singleness of money”**: Ensuring central bank liabilities stay central to tokenized transactions, avoiding fragmentation.
– **Boosting efficiency**: Enabling atomic (simultaneous) settlements via programmability, reducing counterparty risks in interbank transfers.
– **Enhancing resilience**: Automating processes like delivery-versus-payment (DvP) to minimize delays and errors in wholesale systems.

Drawing from global experiments—such as the BIS’s Project mBridge for cross-border payments, Project Dunbar for multi-CBDC interoperability, and the ECB’s trials with DLT-based euro settlements—the paper highlights how tokenization could slash settlement times from T+2 (two days) to near-instantaneous, potentially unlocking trillions in trapped liquidity.

Yet, risks abound. Tokenized systems could amplify contagion if not ring-fenced, fragment liquidity across ledgers, or complicate monetary policy transmission. Emerging markets face added hurdles, like limited tech infrastructure, but also unique upsides, such as streamlined compliance for cross-border trade (e.g., Thailand’s Project Inthanon).

### A Framework for Implementation: Models, Trade-Offs, and Strategies
The paper’s methodology is pragmatic, synthesizing lessons from over a dozen central bank pilots (e.g., Bank of Canada’s Project Jasper, Switzerland’s Project Helvetia III) and BIS/OECD reports. It categorizes approaches into ledger models, operating models, and policy scenarios, using a prioritization matrix to weigh suitability against feasibility.

#### Ledger and Operating Models
– **Single vs. Compatible Ledgers**: A single ledger (central bank-controlled) offers “strict atomicity” for flawless DvP but limits private innovation. Compatible ledgers (multiple interconnected ones) foster competition but risk coordination failures.
– **Operating Models** (see Figure 2 in the paper):
– **Integration**: Central bank runs the ledger (high control, low flexibility).
– **Distribution**: Shared with supervised entities (balanced).
– **Separation**: Private ledgers link to central bank systems (scalable but complex).
– **Permissionless**: Open to all (innovative but risky for stability).

A standout table (Table 1) compares settlement solutions: Tokenized reserves on a single ledger excel in atomicity and use of central bank money, outshining alternatives like RTGS links or privately issued tokens.

#### Monetary Policy in a Tokenized World
Tokenization doesn’t upend policy tools—interest on reserves, open market operations—but adds twists. Smart contracts could automate repo transactions, while coexistence with traditional reserves demands interoperability to avoid silos. Box 4 details experiments like Project Pine (Bank of England), where tokenized reserves enabled programmable policy with minimal disruption.

#### Strategic Roadmap
Central banks should phase in: Start with research (e.g., legal feasibility), move to pilots (sandbox testing), then scale with governance safeguards. Controls are paramount—over issuance, access, data privacy, and emergency halts—to mitigate cyber risks or illicit flows.

### Policy Implications: Balancing Innovation and Stability
The authors urge a “catalytic” role for central banks: Not leading every charge, but setting standards to crowd in private sector innovation. Key takeaways:
– **Jurisdictional Tailoring**: Wealthy economies like the U.S. or Eurozone prioritize atomic settlements; emerging markets focus on inclusion (e.g., Bank of Ghana’s non-bank access pilots).
– **Alternatives Scrutiny**: RTGS bridges or omnibus accounts are stopgaps, but tokenized reserves better align with long-term goals.
– **Global Coordination**: Interoperability (BIS’s “Building Block 10”) is essential to prevent a patchwork of incompatible systems, echoing calls from the G20 for unified standards.

In a nod to macro risks, the paper warns of volatility in capital flows from tokenized assets, advocating macroprudential tools like those in the IMF’s CBDC handbook.

### Why This Matters Now
With tokenization pilots proliferating— from Australia’s Project Acacia to Singapore’s Project Ubin—this IMF note is timely. It positions central banks not as blockers, but enablers, of a tokenized future. As the BIS’s 2024 survey shows, interest is near-universal; inaction risks ceding ground to private stablecoins like USDT, which already dwarf some national GDPs.

For policymakers, the message is clear: Tokenized reserves aren’t inevitable, but ignoring them is. By addressing trade-offs head-on, central banks can harness DLT’s power while safeguarding the monetary system’s bedrock.

**References**
1. Kunaratskul, T., Lannquist, A., Reslow, A., & Zhang, N. X.-Y. (2025). *Central Bank Exploration of Tokenized Reserves*. IMF Fintech Note 2025/011. International Monetary Fund.
– Link: [https://www.imf.org/-/media/files/publications/ftn063/2025/english/ftnea2025011.pdf](https://www.imf.org/-/media/files/publications/ftn063/2025/english/ftnea2025011.pdf)

2. Bank for International Settlements (BIS). (2024). *BIS Survey on Central Bank Digital Currency*. Referenced in the paper for wCBDC interest data.

3. Committee on Payments and Market Infrastructures (CPMI). (2023). *Application of the Principles for Financial Market Infrastructures to Central Bank Digital Currencies*. BIS.

*This analysis draws directly from the IMF paper and related sources. For the full text, including figures and boxes, consult the original PDF.*

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