IMF issues tokenisation warning

The International Monetary Fund (IMF) is raising alarm bells regarding the rapid growth of tokenization in financial markets. For retailers and operators, this means the underlying plumbing of how customers pay and how lenders move money is shifting. The IMF warns that as assets become digitized (tokenized), financial risk is moving away from traditional banks and toward the service providers and tech infrastructures that manage these digital tokens. This shift could lead to new regulatory hurdles that change how financing products are delivered to your customers in the long term. Currently, many point-of-sale financing and Buy Now, Pay Later (BNPL) providers are exploring tokenization to make transactions faster and cheaper. However, the IMF suggests that current monetary policies aren't equipped to handle a world where digital assets circulate outside the traditional banking system. If regulators follow the IMF's advice, we may see stricter oversight for non-bank financial tech companies. This could increase compliance costs for lenders, which might eventually trickle down to the fees merchants pay or the interest rates customers receive. For now, the takeaway for business owners is that the digital shift in financing is under heavy scrutiny. Expect a more complex regulatory environment for any digital-first payment method that uses blockchain or tokenization technology.

Source: Finextra — Lending

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