Most financial executives have heard of tokenisation. It shows up in conversations about capital markets, stablecoins, private credit and securities settlement. It arrives wrapped in enough jargon to make people tune out. That is unfortunate, because the underlying idea isn't complicated.
Tokenisation is representation of a legally recognised claim on a financial asset as a digital token on programmable rails - in the form of smart contracts on blockchain. A bond remains a bond. A fund unit remains a fund unit. What changes is the plumbing - how ownership is recorded, transfers settle, compliance rules travel with the instrument, rather than sitting in a separate system two time zones away.
India understands the first version of this story well. Demat didn't change what a share was, but the form. Paper certificates became e-depository records, friction dropped and securities markets became more scalable.
Tokenisation is the next step - not just electronic record-keeping but programmable record-keeping. A tokenised bond can carry its own transfer restrictions, investor eligibility rules, coupon logic and settlement instructions. Not in 6 separate systems that reconcile overnight, but in the instrument itself.
None of this is magic. A token is a digital representation of rights. Quality of those rights depends entirely on legal title, custody, regulation and governance. Bad assets don't become good because they are tokenised. But good assets can become far more accessible, transferable and usable.
Tokenisation is no longer a pilot-stage conversation. A recent chart of Andreessen Horowitz (a16z), one of the largest tech VCs in Silicon Valley, showed tokenised real-world financial assets crossing $30 bn, up 10x in 2 yrs. Tokenised assets now include US treasuries, private credit, gold and even equities. IMF published a structural assessment this year, calling it the most significant architectural shift in financial markets in decades.
Meanwhile, a parallel development has changed the demand side of the equation. Stablecoins - digital dollars issued by regulated entities, backed by reserves - are now a $300 bn market processing over $9 tn in annual transactions. This is real money, moving at scale, looking for yield. Today, over 93% of it earns nothing. The only yield on the menu is US government paper at 4-5%.
India sits on a $7.7 tn financial market. It runs the world's largest derivatives exchange, and has built the most advanced digital payments system on the planet. Its private credit market yields 12-15% with defaults below 2%. Yet, FII outflows have crossed $22 bn this calendar year, and portfolio allocation to India sits at a 14-yr low.
But FII money is only one pool. Alongside it sits roughly $300 bn of on- chain capital actively hunting yield - and a large base of overseas, India-aware HNIs who stay out because access is too hard. This is an infrastructure problem. Getting global capital into Indian financial assets still requires navigating FPI registration, correspondent banking chains, multiple custodians, currency hedging arrangements and settlement cycles measured in days. For a $300 bn digital dollar capital pool accustomed to settling in seconds, that friction is simply disqualifying.
India should be treating tokenisation as a capital-market infrastructure question, not as a digital-asset side theme to monitor from a distance. Rupee stays domestic money. UPI stays domestic payment infrastructure. But regulated tokenised Indian financial assets could open a new access rail for approved global capital, without dollarising anything.
India doesn't need to invent a venue for this. GIFT City provides a ring-fenced international financial centre with its own regulator, IFSCA, and settlement environment that operates in foreign currency by design, separate from the domestic rupee system. That is precisely the architecture a tokenised access rail requires: a regulated perimeter where approved global capital can hold and trade tokenised Indian financial assets without any of it touching domestic money.
The zoning exists. What remains is to build on it - a tokenisation framework within GIFT City that lets on-chain capital reach an Indian credit fund in minutes, not months. Singapore, Hong Kong and the UAE are building such frameworks. The question is whether India moves with them.
It has done this before. When the world ran open-outcry exchanges, India built NSE and ended up with the world's largest derivatives market. When banking meant branches, India built UPI. In both cases, the market didn't just migrate to the new rail but expanded. New participants arrived precisely because the friction dropped.
The same logic applies here. India has twice turned a change in market plumbing into a step-change in scale. Tokenisation is the third such opening. The assets yield, demand is on- chain, and the rail is buildable. The opportunity is not to defend against digital capital but to give it a regulated door to come through.
The writer is founder, Aarna Protocol
