The Financial Stability Board (FSB) and the Bank for International Settlements (BIS) have both expressed concerns about the risks associated with tokenization in recent reports. Tokenization refers to the digitization of real-world assets using distributed ledger technology. The FSB identified three vulnerabilities of tokenization: the underlying reference asset, the participants in tokenization projects, and the interaction between new technology and legacy systems. The FSB chairman warned that tokenization could have implications for financial stability if it scales up significantly and if vulnerabilities are not addressed through regulation and oversight. The BIS also highlighted the benefits and risks of tokenization, including credit, liquidity, and cyber risks, and called for sound governance. Both institutions have been monitoring and studying tokenization as more countries and firms explore its potential.



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