Financial Stability Board: Tokenization poses low risk to global finance at this stage

The Financial Stability Board (FSB) released a report on Wednesday saying that institutional financial exploration of tokenization poses little risk to the global financial system, mainly due to the limited adoption of the technology so far. In the report, the FSB noted that initiatives such as BlackRock's BUIDL fund are still in the early stages and currently help mitigate potential threats to the financial system. Although the report noted that the technology is currently low risk due to its inability to scale, it still found several financial stability vulnerabilities associated with DLT-based tokenization. The main issues include liquidity mismatch, leverage issues, asset quality, interconnectivity and operational fragility. The report warned that these risks could be exacerbated if asset tokenization scales up significantly, especially if the industry can resolve interoperability issues and obtain clearer regulatory guidance. (TheBlock)