Tokenisation Could Bring India's Hidden Wealth Into the Financial System
Tokenisation could help unlock a significant portion of India's household wealth by making assets such as gold, bonds and property easier to verify, transfer and potentially use as collateral for loans. Edul Patel, co-founder and chief executive officer of cryptocurrency investment platform Mudrex, highlighted this opportunity at the Business Standard Smart Investor Arena 2026.
Speaking after the launch of Mudrex's report, A Builder's Guide to Tokenisation, Patel argued that a substantial amount of wealth held by Indian households remains difficult for financial institutions to assess because ownership records and supporting information are distributed across different systems.
Tokenisation could help address this problem by creating digital representations of assets linked to verifiable ownership information. If supported by appropriate legal recognition and enforcement mechanisms, such records could make it easier for lenders to assess borrowers' assets and financial standing.
The potential benefit extends beyond investment accessibility. Better verification of asset ownership could help reduce information gaps between borrowers and financial institutions, potentially allowing eligible individuals to obtain credit on more competitive terms.
Patel's broader argument is that the challenge is not necessarily the absence of household wealth, but the difficulty of documenting, verifying and using that wealth efficiently within the formal financial system.
What Is Tokenisation and How Does It Work?
Tokenisation involves creating a digital representation of an asset or a legally defined interest in that asset on a digital platform, often using blockchain or distributed-ledger technology.
Depending on the structure, a token may represent ownership, a contractual claim, a beneficial interest or another legally defined right connected to an underlying asset. These arrangements are not interchangeable, and the rights attached to each token depend on the governing legal and contractual framework.
Potential applications include gold, bonds, real estate and other financial or physical assets. In principle, tokenisation can help standardise records, automate certain transactions and make ownership interests easier to track.
For example, a tokenised bond could carry digital records relating to the investor's interest in the instrument. A tokenised gold product could represent a defined claim backed by gold held under an appropriate custody arrangement.
Real estate presents a more complex challenge. Creating a digital token linked to a property does not, by itself, transfer legal title to the land or establish that the token holder has enforceable ownership rights. The legal structure must clearly define what the investor owns and how those rights can be exercised.
Consequently, tokenisation should not be viewed simply as converting an asset into a digital coin. Its effectiveness depends on the connection between the digital record, the underlying asset and the legal rights of the investor.
How Tokenisation Could Reduce Borrowing Costs
One of the most significant potential applications of tokenisation is improving access to credit.
Many households own valuable assets but may struggle to demonstrate ownership or provide the documentation required by lenders. This can make the assessment process more time-consuming and restrict access to formal financing.
A reliable digital system that connects verified ownership records with lending institutions could make asset verification more efficient. Lenders may be able to assess eligible collateral more quickly, while borrowers could potentially face lower administrative costs and fewer documentation hurdles.
Improved transparency could also help financial institutions evaluate risks more consistently. If ownership, encumbrances and relevant asset information can be verified, lenders may have a clearer basis for assessing collateral and structuring loans.
However, lower borrowing costs are a potential outcome, not a guaranteed result. Interest rates will continue to depend on creditworthiness, collateral quality, liquidity, repayment capacity, lender policies and prevailing market conditions.
A digital record cannot eliminate the risk that an asset loses value, becomes difficult to sell or is subject to a legal dispute. Tokenisation will create meaningful benefits only if the information it provides is reliable and the underlying rights can be enforced.
Tokenisation Could Improve India's Bond Market Infrastructure
Patel also highlighted the possibility that tokenisation could address fragmentation in India's debt market.
Investors may encounter the same bond through different platforms, with trading activity distributed across multiple venues. Such fragmentation can make it harder to identify available buyers and sellers, compare prices and execute transactions efficiently.
A common digital ledger could help improve the coordination of ownership records and transactions. Under an appropriately designed system, participants could potentially work with more consistent information, reducing discrepancies between records maintained by different intermediaries.
Patel compared the proposed model with established equity-market infrastructure, including the National Stock Exchange and the BSE, where common market systems support trading and related processes.
A more coordinated structure could improve transparency and make it easier to track ownership changes. Depending on the design, it could also support more efficient settlement and reduce certain operational frictions.
Nevertheless, a shared ledger alone would not automatically create a liquid bond market. Liquidity also requires willing buyers and sellers, transparent pricing, appropriate market-making arrangements and investor confidence.
The legal framework governing the securities, settlement arrangements and responsibilities of intermediaries would remain central to the success of any tokenised debt-market system.
Can Retail Investors Buy Tokenised Property and Bonds?
Tokenisation has attracted attention because it could eventually allow investors to access certain assets with smaller amounts of capital.
Fractional investment structures can reduce the initial amount required to participate in an investment. This may broaden access to assets that would otherwise be difficult for smaller investors to purchase directly.
However, fractional exposure is not the same as direct ownership of the underlying asset. The rights of investors depend on the structure through which the tokens are issued.
For real estate, questions include whether a token represents a direct ownership interest, a stake in a special-purpose entity, a contractual claim or another financial arrangement. Investors must understand their rights to income, voting, resale and proceeds if the underlying property is sold.
Patel acknowledged that important questions remain unresolved, particularly around what it means to own a small monetary interest in a property and how such ownership should function in practice.
The development of tokenised property products will therefore require clarity on property law, investor protection, taxation, custody and resale mechanisms.
For retail investors, the most important consideration is to establish exactly what a token represents before committing money. A token's digital form does not automatically make it a regulated security, a direct property interest or a risk-free investment.
Tokenised Equities and Commodities: Access Will Depend on Product Structure
Patel said Mudrex already offers certain tokenised equity and commodity products. However, he indicated that tokenised Indian equities, bonds and real estate were not broadly available to retail investors through the platform at the time of the discussion, as regulatory pathways for these assets continue to evolve.
The distinction is important because products described as tokenised equities may differ significantly in their legal structure, underlying exposure and investor protections.
Investors should examine whether a product provides direct ownership, a contractual claim, exposure to an underlying asset or another type of arrangement. They should also check the identity and jurisdiction of the issuer, custody arrangements, applicable regulations and the process for redeeming or transferring the tokens.
The availability of a tokenised product on a digital platform should not be interpreted as proof that it has the same legal status or protections as a conventional investment product offered through a regulated Indian market intermediary.
As tokenisation develops, clear product disclosures will be essential to help investors distinguish between genuine asset-backed arrangements and products that merely track an asset's price.
REC's Tokenised Bond Issuance Highlights Early Progress
Patel referred to a tokenised bond issuance by Rural Electrification Corporation (REC) as an important development in India's adoption of the technology.
The issuance demonstrated the possibility of using tokenisation in the debt market. However, Patel noted that the instrument did not yet have an active secondary market.
This distinction highlights one of the most important challenges facing tokenised assets: issuing a token is only the first step. Investors also need to understand how they can sell, transfer or redeem their holdings and what conditions apply.
Without an active secondary market, investors may have limited opportunities to exit before maturity or find a buyer when they need liquidity. A digital representation of a bond does not automatically guarantee continuous trading or immediate access to cash.
For tokenised securities to gain broader acceptance, market participants will need reliable issuance, settlement, custody and redemption arrangements, alongside transparent information about liquidity and transaction costs.
The development of secondary markets will be particularly important if tokenisation is intended to make traditionally less-liquid assets more accessible to retail investors.
Why Trust, Regulation and Legal Ownership Matter
Patel emphasised that confidence in the legal rights attached to a token will be crucial to adoption.
The technology can record transactions and provide a shared view of information, but it cannot independently guarantee that an asset exists, that its ownership records are accurate or that a token holder will prevail in a legal dispute.
For tokenisation to work at scale, investors must be able to establish that the digital representation is connected to an identifiable asset or enforceable claim. The framework must also address custody, fraud prevention, disputes, insolvency and the responsibilities of issuers and intermediaries.
Patel argued that India may not need a separate regulator solely for tokenisation because the underlying assets already fall within established regulatory jurisdictions. Under this approach, regulators would continue supervising assets within their respective areas, while policymakers address the risks arising from digital infrastructure and the interaction between different systems.
The precise regulatory treatment will depend on the asset, the rights being offered, the transaction structure and the applicable law.
For investors, regulatory clarity is not merely a compliance issue. It directly affects ownership rights, the ability to recover assets in a dispute and the level of protection available if an issuer or service provider fails.
Could India Build a UPI-Like Public Infrastructure for Tokenised Assets?
Patel said wider adoption could require public digital infrastructure comparable in ambition to the Unified Payments Interface (UPI).
UPI helped standardise the way participating institutions and applications process digital payments. A comparable infrastructure for tokenised assets could potentially establish common standards for verifying ownership, transferring assets and coordinating transactions.
Such a system could allow private-sector businesses to develop products and services on top of shared infrastructure, rather than requiring each platform to build an isolated network.
Common standards could also improve interoperability, making it easier for eligible assets and ownership records to move between compatible systems.
However, asset markets are more complex than payment transactions. Different assets have different legal characteristics, settlement requirements, custody arrangements and investor-protection needs.
Any public infrastructure would therefore need to accommodate these differences while maintaining strong cybersecurity, data protection, governance and accountability standards.
The challenge for policymakers will be to encourage innovation without weakening the safeguards that protect investors and the integrity of financial markets.
Crypto Taxation Remains a Challenge for Digital-Asset Platforms
The discussion also covered India's tax treatment of crypto assets, including the 30 per cent tax on applicable income from virtual digital assets and the 1 per cent tax deducted at source on applicable transfers, subject to the relevant statutory provisions.
Patel argued that crypto platforms and exchanges need to demonstrate how their services contribute to economic development if they want policymakers to reconsider the existing tax framework.
For digital-asset businesses, the issue extends beyond trading activity. Companies seeking a larger role in financial services may need to demonstrate their contribution through innovation, better access to financial products, more efficient infrastructure and responsible business practices.
Any potential change in taxation would depend on government policy and applicable legislation. Investors and platforms should not assume that tax rules will change simply because new products or technologies emerge.
For individuals, understanding the tax treatment of a tokenised product remains essential before investing. The fact that an asset is represented digitally does not automatically determine its tax classification.
What Tokenisation Could Mean for India's Financial Sector
If the necessary infrastructure and regulatory safeguards develop, tokenisation could influence several areas of India's financial system.
For households: Verified asset records could make it easier to demonstrate ownership and potentially use eligible assets as collateral.
For retail investors: Some investment structures could lower minimum entry amounts and broaden access to selected assets, although fractional exposure does not necessarily confer direct ownership.
For banks and lenders: More reliable digital records could streamline certain verification processes, subject to legal recognition and the quality of the underlying data.
For bond markets: Shared transaction records could improve operational coordination and ownership tracking, while secondary-market liquidity would still depend on investor participation and market structure.
For financial-technology companies: Standardised infrastructure could create opportunities to build new services around asset verification, custody, transfers and investment access.
These potential benefits will not emerge uniformly. Products backed by clear legal rights, credible issuers, robust custody arrangements and transparent redemption mechanisms are more likely to gain investor confidence than structures with unclear ownership or limited exit options.
Market Outlook: Tokenisation's Opportunity Depends on Execution
Tokenisation could become an important development in India's financial-services ecosystem by improving the way assets are recorded, accessed and potentially used as collateral. Edul Patel's comments at the Business Standard Smart Investor Arena 2026 highlight the possibility that digital asset records could help make household wealth more visible to financial institutions and reduce certain barriers to credit.
The long-term opportunity extends to bond-market infrastructure, fractional investment structures and the development of new financial products. However, these benefits will depend on legal enforceability, regulatory clarity, reliable custody, cybersecurity and the emergence of functional secondary markets.
For investors, the immediate priority should be understanding the rights attached to each token rather than focusing only on the technology behind it. They should verify the issuer, the underlying asset, the applicable regulatory framework, redemption conditions, liquidity and tax implications before investing.
Tokenisation may eventually become an increasingly invisible part of financial services. Its success, however, will depend less on the novelty of digital tokens and more on whether the infrastructure delivers genuine improvements in transparency, affordability, accessibility and investor protection.