As the world races toward digitising real-world assets on blockchain, regulators are growing uneasy.
This week, the International Organization of Securities Commissions (IOSCO) — the global body overseeing financial market standards — issued a sharp warning about the “unintended risks” emerging from asset tokenisation.
Tokenisation, the process of converting physical or financial assets into digital tokens on a blockchain, has been hailed as one of the most transformative innovations in modern finance. From tokenized government bonds to real estate and gold-backed tokens, global banks and fintechs have invested billions in infrastructure designed to make finance more transparent, liquid, and efficient.
However, IOSCO’s new report flags that the same decentralized systems powering tokenization may also create new systemic risks — including liquidity mismatches, regulatory gaps, and governance failures.
“Tokenisation holds immense promise, but it can also amplify the same fragilities that caused the 2008 crisis — only now, they’re on-chain,” the report noted.
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What Regulators Are Concerned About
- Transparency without accountability: While blockchains are open, not every tokenised asset represents what it claims to. Inadequate audits and off-chain dependencies can erode trust.
- Cross-border enforcement issues: As tokenised securities trade globally, regulators are struggling to determine who has jurisdiction when things go wrong.
- Concentration risk: Many tokenised markets are being built by a handful of private entities, centralising control in ways that conflict with crypto’s decentralisation ethos.
IOSCO’s warning follows similar statements from the European Central Bank and the U.S. SEC, both urging oversight for tokenised products that mimic securities or stablecoins.
Why It Matters for Africa
Africa is only beginning to explore tokenisation — from real estate investment schemes in South Africa to agricultural yield token projects in Nigeria. While these innovations attract global capital, regulators must ensure that investor protection frameworks keep pace.The takeaway? Tokenisation isn’t just a financial innovation — it’s a regulatory test for how far blockchain can safely integrate into the mainstream economy.
