India’s financial architecture has periodically undergone step-change reforms that quietly but fundamentally altered economic participation. Bank nationalisation expanded credit access. Dematerialisation modernised capital markets. UPI democratised payments at an unprecedented scale. The growing conversation around asset tokenisation suggests the next frontier may lie not in how Indians transact, but in how they own, invest and manage risk.
AAP MP Raghav Chadha’s call for a dedicated Asset Tokenisation Bill has brought this issue into sharper focus. His argument draws a direct parallel with UPI: just as digital payments unlocked inclusion for small merchants and informal participants, tokenisation could lower entry barriers to asset ownership that have historically remained the preserve of institutional or high-net-worth investors. The comparison is ambitious but not misplaced.
What Asset Tokenisation Really Means
At its core, asset tokenisation is the process of converting rights over a real-world asset into digital tokens recorded on a distributed ledger. These assets can range from commercial real estate and infrastructure projects to commodities, private credit instruments or revenue-generating contracts. Each token represents a fractional claim on the underlying asset, allowing ownership to be divided, transferred and settled digitally.
Unlike traditional securitisation, tokenisation promises near real-time settlement, granular ownership, programmable compliance and lower intermediation costs. It does not eliminate risk, but it changes how risk is packaged, priced and distributed across investors.
Why Tokenisation Matters in India’s Financial Landscape
India’s investment ecosystem remains paradoxical. Household financial savings are high, yet asset allocation remains conservative. A significant portion of middle-class wealth is parked in bank deposits, insurance products or a narrow set of mutual funds. Meanwhile, large pools of productive assets such as commercial real estate, infrastructure, warehousing, renewable energy and private credit remain largely inaccessible.
Tokenisation addresses this mismatch by transforming illiquid, high-ticket assets into investable units. Fractional ownership enables broader participation, while digital infrastructure improves transparency and auditability. For a country with rising formalisation, improving financial literacy and growing digital trust, this has material implications.
More importantly, tokenisation aligns with India’s long-term capital needs. Infrastructure financing gaps, stressed bank balance sheets and the limits of traditional project finance all point towards alternative capital mobilisation mechanisms. Tokenised assets, if properly regulated, could channel household savings into productive uses without overburdening the banking system.
Risk Management and Portfolio Diversification Implications
From a risk perspective, tokenisation introduces both opportunity and complexity. On the positive side, it allows retail and institutional investors to diversify beyond public equities and debt. Exposure to real assets with stable cash flows can improve portfolio resilience, particularly in inflationary or volatile interest-rate environments.
Liquidity risk, traditionally a key deterrent in real assets, can be mitigated through secondary token markets. Price discovery improves as ownership becomes granular. Settlement risk reduces through automated smart contracts. These features enhance overall market efficiency.
However, tokenisation does not eliminate underlying asset risk. Credit risk, project execution risk, regulatory risk and valuation uncertainty remain. In fact, digitisation can sometimes obscure these risks behind technological sophistication. Without robust disclosure norms, independent valuation standards and enforceable investor rights, tokenised assets could amplify mis-selling rather than inclusion.
Cyber risk and operational risk also become central. Token custody, private key management, platform integrity and resilience against systemic cyber incidents must be treated as financial stability concerns, not merely technology issues.
The Regulatory Imperative
Global experience underscores one lesson clearly: technology moves faster than regulation, but trust follows regulation. Jurisdictions such as Singapore, the UAE and parts of the EU have moved ahead not by encouraging speculative crypto-assets, but by creating clear frameworks for asset-backed tokenisation under existing securities and financial laws.
India’s current regulatory posture remains fragmented. Questions around asset classification, investor protection, enforceability of tokenised claims, taxation and cross-border participation remain unresolved. Without a dedicated legal framework, tokenisation risks either being stifled by uncertainty or developing in regulatory grey zones.
A well-crafted Asset Tokenisation Bill would not be about promoting innovation for its own sake. It would define what can be tokenised, who can issue, who can invest, how risks are disclosed and how failures are resolved. Crucially, it would clarify supervisory responsibility across financial regulators, avoiding overlaps and gaps.
Strategic Implications for India
Tokenisation sits at the intersection of finance, technology and national competitiveness. Capital today is mobile, discerning and regulatory-sensitive. If India fails to provide clarity, innovation and investor protection, capital will continue to flow to jurisdictions that do. Conversely, a credible framework could position India as a leader in regulated digital finance, not a follower.
For the middle class, tokenisation could gradually rebalance portfolios away from excessive dependence on low-yield instruments. For institutions, it could unlock new funding avenues. For the financial system, it offers a chance to distribute risk more efficiently rather than concentrate it on bank balance sheets.
The Way Forward
Asset tokenisation should not be viewed as a revolutionary replacement for existing markets, but as an evolutionary layer built on sound regulation, risk awareness and governance. The real question is not whether India should embrace tokenisation, but whether it can do so deliberately, prudently and ahead of the curve.
If UPI taught India how to move money at scale with trust, tokenisation would test whether the system can allow ownership, risk and returns to move with equal confidence. The outcome will depend less on technology and more on the quality of policy choices made today.
