The Fed weighed in on tokenization at a speech last week to the Central Bank of West African States in Dakar. What the Fed ✅ supports: ✅ Intraday liquidity & collateral mobility = killer institutional use case ✅ Smart contracts automate margin calls & collateral substitutions ✅ Tokenized MMFs can dampen run risk ✅ Fractional ownership = expands access in emerging markets ✅ Multi-leg, multicurrency settlement = massive efficiency gain ✅ New competition — lowers barriers for fintech to challenge incumbents ✅ Cross-border payments — especially relevant for West Africa & EM What the Fed ⚠️ is watching: ⚠️ Run risk — 24/7 redemptions could accelerate stress events ⚠️ Token liquidity ≠ underlying asset liquidity — dangerous disconnect ⚠️ Interconnectedness — shocks transmit faster across tokenized & traditional systems ⚠️ Smart contract bugs — less human ability to intervene when automated ⚠️ Cyberattacks — common in DeFi, rising risk as scale increases ⚠️ Opaque assets — tokenizing illiquid assets creates hidden fragility