Federal Reserve Speeches·May 8, 2026, 5:45 AM ET

Cook, Perspectives on Tokenization and Implications for the Financial System

The speaker, a Federal Reserve Governor, returned to Dakar to discuss tokenization in financial markets, noting its potential to improve cross-border payments & access to capital in West Africa.
Tokenization is defined as creating digital representations of assets on distributed ledger technology (DLT) using smart contracts to automate & streamline financial processes.
The market for tokenized assets in the U.S. more than doubled in the last year to approximately $25 billion, driven by government bonds, credit funds, & money market funds.
Key opportunities include enhanced collateral mobility, intraday liquidity management, reduced settlement times, & fractional ownership that could expand market access for investors with limited resources.
Financial stability concerns involve run risks from on-demand redemptions, 24/7 trading speeds that may accelerate crises, & increased interconnectedness between digital & traditional financial systems.
Operational risks include smart contract vulnerabilities & cyberattacks that could threaten security as processes become more automated.
The Federal Reserve supports responsible innovation while monitoring these risks through collaboration with global bodies like the FSB & BIS & ongoing research into digital asset implications.