RBI to launch certificate of deposits' tokenisation tomorrow, says official

The pilot for tokenisation of certificate has commenced and it will be launched tomorrow for deposits, said Suvendu Pati, Reserve Bank of India's chief general manager, fintech told Moneycontrol.

"We have picked up every use case on certification of deposits for tokenisation of assets. It's a short-term instrument issued by banks.” said Pati, on the sidelines of the Global Fintech Fest (GFF) on October 7.

According to Pati, this marks a significant step in the central bank's efforts to modernise and digitise financial instruments using blockchain-based technologies.

Pati emphasised that the tokenisation of central bank digital currencies (CBDCs) and other financial assets brings immense efficiency gains.

“By tokenising, central bank digital currency is getting the efficiency that is immense to harness. We can easily build automated systems into these tokenisation systems,” he said, pointing to the potential of automation and programmability through technologies like smart contracts.

Highlighting the RBI’s progressive stance, he noted that tokenising Certificates of Deposit (CDs) which are tradable, short-term debt instruments issued by banks could unlock new levels of efficiency and transparency.

However, Pati cautioned that such innovations must be approached thoughtfully, with robust legal and regulatory frameworks in place. “When we introduce tokenisation of such financial instruments, integrity and enforceability need to be articulated. If an asset is getting tokenised, it should not lead to duplication,” he said.

He stressed the need for legal clarity and regulatory alignment to ensure that ownership rights are clearly defined. “There needs to be legal changes put in place. There needs to be clarity of thought from a regulatory perspective, so that there is clarity on ownership rights,” he added.

Pati also touched upon the importance of inclusivity in financial innovation, particularly through the concept of fractionalisation which is the process of breaking down high-value assets into smaller, tradable units.He said this could democratise access to financial products while improving market participation.

"Fractionalisation is also another thought we need to have. Inclusivity and bringing efficiency to the tokenisation space should be our goal,” he said.While acknowledging the progress made in the Indian financial markets, Pati noted that further advancements were necessary. “Our current market is efficient but needs to be brought to another level,” he said.