DAKAR, Senegal—Federal Reserve Governor Lisa Cook said tokenization could reshape global financial markets by improving cross-border payments, liquidity management and access to capital markets, while warning that the fast-growing technology also introduces new financial stability and cybersecurity risks that central banks must closely monitor.
Speaking at the Central Bank of West African States Conference on Digital Assets hosted by the Central Bank of West African States (BCEAO), Cook said tokenization is already drawing significant interest from major financial institutions and fintech firms as blockchain-based systems promise faster settlement, automated transactions and more efficient collateral management. She noted tokenized assets in the U.S. have more than doubled over the past year to roughly $25 billion in market capitalization.
Cook said tokenization could hold particular promise for West Africa and other emerging economies by enabling faster and potentially lower-cost cross-border transactions while expanding investment access through fractional ownership models. She added that financial institutions are increasingly exploring tokenized money market funds, government bond funds and repurchase agreements as tools for intraday liquidity management and operational efficiency.
At the same time, Cook cautioned that tokenization could alter liquidity dynamics and create new channels for financial contagion if digital assets become more interconnected with traditional markets. She warned that around-the-clock trading on blockchain networks could accelerate runs during periods of stress and said the growing links between tokenized assets and conventional reserve holdings could amplify shocks across both systems.
Cook also pointed to cybersecurity and operational vulnerabilities tied to smart contracts and decentralized finance platforms, noting that increasingly automated systems may leave less room for human intervention when errors or attacks occur. While emphasizing that she supports financial innovation, Cook said the Federal Reserve and global regulators are actively studying tokenization’s implications through collaborations with international organizations, peer central banks and industry participants.