A new report from the International Organization of Securities Commissions (IOSCO) has underscored the complex challenges facing the growing tokenization market, citing uneven efficiency gains, regulatory inconsistencies, and legal uncertainty.
In its final report on the tokenization of financial assets, IOSCO takes a cautious stance, noting that while tokenization can “enhance efficiency and transparency,” it also “introduces new risks or amplifies existing ones that regulators must understand and address to protect investors.”
The organization points to key risk areas, including a lack of legal clarity, operational vulnerabilities, and heightened cyber threats. Although these are not new categories of risk, IOSCO stresses that they manifest differently in a distributed ledger technology (DLT) environment, requiring tailored controls and oversight.
The report further identifies interoperability issues and the absence of credible settlement assets as significant obstacles to broader adoption. Even where efficiency gains are realized, they are described as “uneven,” particularly for firms still dependent on traditional trading and post-trade systems.
Regulatory responses across jurisdictions remain fragmented, IOSCO notes. Some regulators are adapting existing frameworks, while others are issuing new guidance or establishing dedicated sandboxes for tokenization. To promote greater consistency, IOSCO urges its members to follow the principle of “same activities, same risks, same regulatory outcomes” and to align their approaches with the organization’s Policy Recommendations for Crypto and Digital Asset Markets and Policy Recommendations for Decentralized Finance.
“Although adoption remains limited, tokenization has the potential to reshape how financial assets are issued, traded, and serviced,” said Tuang Lee Lim, chair of IOSCO’s board-level fintech task force. “Members developing regulatory approaches for tokenized financial assets would find it useful to refer to IOSCO’s existing policy recommendations in these areas.”
