Tokenized assets may shift crypto volatility to traditional markets.

Shri333

The Federal Reserve has released a report titled "Tokenization: An Overview and Its Financial Stability Implications." The report aims to provide background knowledge on tokenization, discuss its potential benefits, and address financial stability risks. According to the report, the current scale of tokenization is relatively small, whether measured comprehensively or relative to the market size of each token's reference assets. However, many projects involving various reference assets are in development, indicating that tokenization may become a larger component of the digital asset ecosystem. The most prominent benefit of asset tokenization is reducing barriers to entry into markets that are otherwise challenging to access and increasing liquidity in those markets. The report points out that the financial stability risks of tokenization are primarily related to the interconnections established by tokenization between the digital asset ecosystem and the traditional financial system. In cases of a sufficiently large scale, tokenized assets can transfer volatility from the cryptocurrency asset market to the reference asset markets of the crypto tokens.

Geet99530

Yes, indeed, it's unlikely that the two markets can be completely isolated.

Jayne94133

The Federal Reserve is the central bank of the United States, right?