# Tokenization: Overview and Financial Stability Implications

Source: https://www.federalreserve.gov/econres/feds/tokenization-overview-and-financial-stability-implications.htm
Kiwi News: https://news.kiwistand.com/stories/Tokenization-Overview-and-Financial-Stability-Implications?index=0x651069cb5b02c802f48cedebac2c11874823ef54ff0dab946f0347626a5ba71d576fbbad
Submitted by 11b.eth on 2023-09-24 UTC, 3 upvotes, 0 comments

## Summary

Tokenization, the process of creating crypto tokens that represent non-crypto reference assets, is a rapidly growing financial innovation that creates interconnections between digital asset markets and the traditional financial system. The paper by Francesca Carapella, Grace Chuan, Jacob Gerszten, Chelsea Hunter and Nathan Swem outlines its potential benefits and financial stability implications. It states that, at sufficient scale, tokenized assets could transmit volatility from crypto asset markets to the markets for the tokens' reference assets. The authors note that the views expressed are their own and do not indicate concurrence by other Board staff or the Board of Governors.

## Article

September 2023 (Revised December 2023)

Tokenization: Overview and Financial Stability Implications

Francesca Carapella, Grace Chuan, Jacob Gerszten, Chelsea Hunter, Nathan Swem

Abstract:

In this paper we outline tokenization, which is a new and rapidly growing financial innovation in crypto asset markets, and we discuss potential benefits and financial stability implications. Tokenization refers to the process of constructing digital representations (crypto tokens) for non-crypto assets (reference assets).1 As we discuss below, tokenizations create interconnections between the digital asset ecosystem and the traditional financial system. At sufficient scale, tokenized assets could transmit volatility from crypto asset markets to the markets for the crypto token’s reference assets.

Keywords: Financial stability and risk, cryptoassets, financial innovations, interconnections, tokenization

DOI: https://doi.org/10.17016/FEDS.2023.060r1

PDF: Full Paper

Related Materials: Accessible materials (.zip)

Original Paper: PDF | Accessible materials (.zip)

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Last Update: October 09, 2024