IMF Deputy Director: "AI Attacks Are on a Different Level... Authorities Must First Identify Critical Infrastructure for Tokenization" [Issue Interview]

Authorities must first identify precisely what constitutes "critical infrastructure"
Understand channels through which disruptions can spread and ensure business continuity of critical service providers

The International Monetary Fund (IMF) has warned that the risk of a systemic crisis in global finance could rise if cyberattacks powered by artificial intelligence (AI) target critical infrastructure across financial markets, including the tokenization market. The IMF said financial authorities must act far more proactively than they did in the past, when they focused on containing crises after they occurred. It stressed that authorities must first identify precisely what constitutes “critical infrastructure” from a systemic perspective and understand the channels through which disruptions can spread.

Athanasios Vamvakidis, deputy director of the IMF’s Monetary and Capital Markets Department, answers questions during an interview with local media on the 8th, following an event unveiling the tokenization chapter of the Global Financial Stability Report (GFSR) at the Bank of Korea in Jung-gu, Seoul. Bank of Korea

Athanasios Vamvakidis, deputy director of the IMF’s Monetary and Capital Markets Department, made the remarks in an interview with local media on October 8 at the Bank of Korea in Jung-gu, Seoul, after an event unveiling the chapter “The Expansion of Tokenization: New Efficiencies and Vulnerabilities” in the Global Financial Stability Report (GFSR). “New technologies always bring benefits and risks, but AI is different in degree,” he said. “In the past, regulatory and supervisory authorities stepped in to contain crises after they broke out. Now, they need to respond far more proactively.” He said authorities, too, need to adopt new approaches to address emerging risks.

Caio Fonseca Ferreira, IMF deputy division chief for financial supervision and regulation, and Senior Financial Sector Expert Gonzalo Fernandez Dionis, who joined the interview, also said that authorities need to respond differently than before to cyberattacks powered by AI. “As tokenization markets expand, critical infrastructure for the financial system as a whole will emerge. The very existence of this critical infrastructure could magnify the impact on the entire system of a cyberattack or operational problem,” Ferreira said. “Authorities need to identify precisely what constitutes ‘critical infrastructure’ from a systemic perspective.” He said this includes heavy reliance on a very small number of cloud providers and the use of the same software. “A flaw in a particular piece of software could affect the entire system, so authorities must understand the channels through which disruptions can spread and focus on ensuring the business continuity of critical service providers,” he said.

Dionis said, “With blockchain technology, every node has a shared ledger of transaction records, so even if one node is attacked, the other nodes can preserve the ledger and transaction records intact.” He added that while risks may increase, the potential to mitigate them through the design of the technology’s architecture also grows.

Caio Fonseca Ferreira, IMF Deputy Division Chief for Financial Supervision and Regulation, answers questions during an interview with local media following an event unveiling the tokenization chapter of the Global Financial Stability Report (GFSR) at the Bank of Korea in Jung-gu, Seoul, on the 8th. Bank of Korea

Vamvakidis described the acceleration of market responses enabled by the tokenization of financial assets as a “double-edged sword.” It could improve efficiency across markets, including by greatly speeding up cross-border payments and dramatically reducing fees, but risks could also emerge more quickly. “A situation could deteriorate very rapidly, but, on the other hand, market discipline could operate more forcefully,” he said. “When a bank run—a large-scale withdrawal of deposits—occurs, regulators need to distinguish whether the underlying cause was technology or something else, and respond accordingly. There is no time to put off adapting to the new environment.”

He said, however, that tokenization itself is not the main cause of bank runs: the issue concerns technology as a whole, not tokenization alone. He added, “AI could detect rumors about the soundness of a particular financial institution and proactively suggest transferring funds, in addition to the risks mentioned earlier. Authorities need to change by detecting and preventing potential risks, such as bank runs, in advance and adjusting run-off rate assumptions embedded in prudential frameworks.”

On the Bank of Korea’s digital currency projects, including Project Hangang and Agora, he said, “In a world where payments are becoming digital, building trust is what matters most, so it is a positive move for central banks to be at the center of this process.” He also said the projects align well with two key priorities emphasized in the IMF report: “regulatory clarity on the status of tokenization” and “the availability of safe and scalable settlement assets backed by central bank money.”

He said concerns about privacy violations involving tokenized assets could be addressed through an appropriate regulatory framework and choices in system design. “Tokenized assets are fundamentally securities, so the broad regulatory framework that applies to traditional securities should apply to them as well,” Ferreira said. “That alone could address most regulatory concerns.” He added, “Many countries are considering how to govern permissionless blockchains. Traditional securities regulation identifies a clear accountable entity—a company—but that is difficult to do with public blockchains.” He said institutional adjustments are therefore needed in areas such as consumer protection, anti-money laundering, and the management of various digital wallets. He said approaches such as using regulatory sandboxes to test the limits of regulation alongside the market are also needed.

Gonzalo Fernandez Dionis, a senior financial expert, answers questions during an interview with local media following an event unveiling the tokenization chapter of the Global Financial Stability Report (GFSR) at the Bank of Korea in Jung-gu, Seoul, on the 8th. Bank of Korea

He said foreign exchange markets would also be affected by the tokenization of financial assets, though the impact would be limited. “Retail investors may be more exposed to foreign exchange risk, and exchange rate volatility could temporarily increase,” Vamvakidis said. “But the global foreign exchange market is enormous, with daily trading volume of about $7 trillion, so tokenization itself is unlikely to become a key driver of volatility across the entire foreign exchange market.” He said access to overseas assets through tokenization would still be subject to regulatory oversight, allowing authorities to act if capital inflows or outflows became excessive.

He nevertheless stressed that monetary authorities must take into account the possibility that tokenization could increase volatility in foreign exchange markets. “Exchange rate overshooting caused by capital inflows and outflows affects the monetary policy stance, and dollarization risks could rise in some emerging economies,” Vamvakidis said. “In the digital currency era, strengthening the health of domestic economies will become even more important to preserve the effectiveness of monetary policy.”

Meanwhile, the tokenized real-world asset (RWA) market had grown to $65 billion as of July. However, the IMF said that the market’s concentration in the United States and the high share of issuers whose domiciles have not been disclosed could create opportunities for regulatory arbitrage or undermine transparency.

The IMF included this analysis as a separate chapter in the GFSR, reflecting its focus on the expansion of tokenization markets. The IMF’s Global Financial Stability Report is published every April and October.

This content was produced with the assistance of AI translation services.