Tokenisation of Real-World Assets: Policy Before Markets

Tokenisation of real-world assets is no longer a theoretical exercise. Across financial centres, regulators and market institutions are running pilots that represent securities, deposits, commodities, and fund units in digital form. Yet despite growing experimentation, tokenisation has not reached systemic scale. The limiting factor is not technology or investor interest. It is the readiness of policy frameworks to absorb these instruments into the core of regulated markets.

At its simplest, tokenisation seeks to express legal claims on real assets as digital representations that can be issued, transferred, and settled through shared infrastructure. Proponents often emphasise speed, fractionalisation, and efficiency. In practice, these benefits only materialise when legal enforceability, settlement finality, and supervisory oversight are clearly established. Where these foundations are uncertain, tokenised assets remain peripheral, regardless of technical sophistication.

Financial markets have always relied on institutional sequencing. Ownership is defined by law before it is traded. Settlement systems are governed before volumes scale.

Custody and disclosure rules precede market expansion. Tokenisation does not eliminate these requirements. It compresses them. When ownership and transfer are encoded digitally, weaknesses in legal clarity or registry design surface immediately, rather than being absorbed through manual reconciliation.

This reality is shaping regulatory responses globally. Central banks and securities regulators have converged on a cautious but structured approach. In India, both the Reserve Bank of India and the Securities and Exchange Board of India have signalled that tokenised instruments must sit within existing frameworks for market integrity, investor protection, and financial stability. Regulatory engagement has focused on pilots and sandboxes rather than broad authorisation, with clear separation between speculative crypto-assets and regulated financial instruments.

A similar pattern is visible internationally. The European Union’s DLT Pilot Regime allows limited experimentation with tokenised securities under defined conditions, explicitly prioritising supervisory visibility and legal continuity. Singapore and Japan have concentrated on wholesale use cases such as deposit tokens and interbank settlement, where participants are known and risk is contained. These initiatives differ in scope, but they share a common logic: markets are allowed to test tokenisation only once policy questions around ownership, custody, and settlement are addressed.

What assets can be tokenised?

One lesson cuts across jurisdictions. Tokenisation does not reduce the importance of registries. It increases it. Every tokenised asset must be anchored to an authoritative record that establishes provenance, ownership, encumbrances, and transfer restrictions. Without such registries, digital tokens function as informational artefacts rather than legally enforceable claims.

This challenge becomes sharper as interest extends beyond traditional securities. Real estate, infrastructure assets, commodities, and carbon instruments involve complex rights and ongoing obligations. Fractionalisation may increase liquidity at the margin, but without registries that record the full lifecycle of the underlying asset, markets risk creating parallel systems disconnected from legal reality. In such cases, efficiency gains are illusory and fragility increases.

Settlement architecture is equally decisive. Tokenised assets require trusted settlement instruments to avoid recreating counterparty risk in digital form. This is why many pilots pair asset tokenisation with central bank money or regulated deposit tokens. The objective is not novelty, but certainty. When asset transfer and payment settlement occur within a common, supervised environment, operational and credit risks are reduced.

India’s experience with digital public infrastructure offers a relevant institutional analogy. Systems such as Aadhaar, DigiLocker, and UPI did not succeed because markets demanded them. They succeeded because policy decisions on authority, governance, and interoperability preceded scale. Markets innovated on top of stable foundations rather than forcing regulation to retrofit itself after adoption. Tokenisation will require the same discipline.

This is where trust registries move from design detail to policy priority. Registries that are authoritative, interoperable, and recognised across institutions allow tokenised markets to remain connected to legal and supervisory systems. They make it possible for regulators, courts, and market participants to rely on digital representations without ambiguity.

SUTRA’s focus on trust registries speaks directly to this requirement. Tokenisation will not be enabled by isolated platforms or bespoke pilots alone. It will scale only where shared reference systems exist that link digital tokens to real-world rights and obligations in a way that institutions can enforce and supervise.

As India approaches its next phase of capital market and financial sector reform, the sequencing question becomes unavoidable. Tokenisation can strengthen transparency, efficiency, and resilience, but only if policy leads markets rather than reacting to them. Where governance and registries are treated as foundational infrastructure, tokenisation can integrate smoothly into the financial system. Where they are treated as afterthoughts, fragmentation is likely to reappear in digital form.

The future of tokenisation, then, is not a contest between innovation and regulation. It is a question of order. Policy must come first, not to restrain markets, but to make them durable.

References

• Bank for International Settlements. Annual Economic Report 2025: Digital Finance and the Architecture of Trust. Basel: BIS, 2025.

• Bank for International Settlements. Committee on Payments and Market Infrastructures. Tokenisation in Financial Markets: Infrastructure and Settlement Considerations. Basel: BIS, 2024.

• European Central Bank. Distributed Ledger Technology and Securities Settlement: Lessons from the DLT Pilot Regime. Frankfurt: ECB, 2024.

• European Union. Regulation (EU) 2022/858 on a Pilot Regime for Market Infrastructures Based on Distributed Ledger Technology. Official Journal of the European Union, 2022.

• International Monetary Fund. The Rise of Tokenised Assets: Implications for Financial Stability and Market Structure. IMF Staff Discussion Note. Washington DC: IMF, 2024.

• Reserve Bank of India. Annual Report 2024–25. Mumbai: RBI, 2025.

• Reserve Bank of India. Concept Note on Central Bank Digital Currency. Mumbai: RBI, 2022.

• Securities and Exchange Board of India. Consultation Paper on Regulatory Framework for Digital and Tokenised Securities. Mumbai: SEBI, 2024.

• World Economic Forum. Tokenization of Assets: Policy Considerations and Governance. Geneva: WEF, 2024.