A background note can be accessed here: IMF on How tokenization Could Reshape Financial Infrastructure
The IMF report argues that tokenization is not simply another stage of financial digitisation but a structural redesign of financial market infrastructure, affecting how assets are issued, settled, and governed. To what extent should India treat tokenization as a financial infrastructure reform rather than as a fintech innovation?
The IMF’s 2026 report states that tokenization represents a fundamental structural redesign of financial market infrastructure, moving far beyond mere incremental digitisation. While digitisation simply wraps legacy systems in a modern digital interface, tokenization reconfigures the underlying financial architecture, converting assets into programmable code so that ownership and payment are exchanged instantly and simultaneously. It completely alters how assets are issued, transferred, owned, settled, and governed. For India, recognising this shift from front-end cosmetic updates to systemic infrastructure reform is crucial.
The transformation is already taking shape across India's regulatory landscape. The Reserve Bank of India (RBI) has initiated pilots for tokenized Certificates of Deposit (CDs) using wholesale Central Bank Digital Currency (CBDC). The Securities and Exchange Board of India (SEBI) is actively exploring blockchain-based tokenization for corporate bonds to enhance liquidity and automate settlements.
Further, India’s experience with Digital Public Infrastructure (DPI), including UPI, Aadhaar, and the Account Aggregator framework, demonstrates how public digital infrastructure can catalyse large-scale private innovation. Guided by the same model, policymakers should resist treating tokenization as a standalone retail product. Instead, it should be positioned as the next evolutionary step in modernising core market infrastructure, especially for sovereign debt (G-Secs), corporate bonds, and trade finance. Ultimately, as the IMF highlights, success will depend on a legal and institutional framework that delivers legal certainty, robust governance, and seamless interoperability across ledgers.
The report emphasises that while private tokenized networks can improve efficiency, public authorities must continue to provide legal certainty, settlement finality, interoperability standards, and systemic oversight. How should India balance innovation by banks and fintech firms with the continued central role of institutions such as the RBI and financial regulators?
In a tokenized financial system, a critical tension exists between private innovation and public trust anchors. Private tokenized networks are the essential engine of market efficiency. However, as tokenization becomes part of mainstream financial market infrastructure, the IMF argues that private networks alone cannot provide public functions such as systemic liquidity management, legal settlement finality, or universal interoperability.
Balancing these forces is critical for India’s tokenization journey. Public authorities such as the RBI and SEBI must continue to provide legal certainty, settlement finality, interoperability standards, and systemic oversight. The RBI’s cautious stance on private stablecoins, advocating for CBDCs due to their inherent stability and public trust, exemplifies this balance. India’s approach, as seen in the IFSCA’s consultation paper on the tokenization of Real-World Assets (RWAs), seeks to enable innovation while ensuring robust regulatory frameworks are in place to protect financial stability and consumer interests.
Ultimately, maximising the economic benefits of tokenization requires both forces to act in tandem. This involves creating regulatory sandboxes for experimentation while maintaining the central role of institutions in providing a secure and reliable financial ecosystem. While private innovation must lead the development of agile, user-centric market applications, trusted public institutions must remain the ultimate backstop, safeguarding monetary sovereignty, financial stability, macroeconomic oversight, and public confidence in the financial system.
The IMF highlights interoperability as a prerequisite for scaling tokenized finance, warning that disconnected ledger systems could fragment markets and reduce efficiency. As India expands its digital financial ecosystem, how should it position itself within emerging global tokenized markets?
The trade-off between rapid domestic adoption and global interoperability represents a defining crossroad for India's tokenized finance journey. Historically, focusing on a closed domestic ecosystem allows public authorities to optimise for local policy goals such as maintaining tight capital controls, enforcing data sovereignty, and ensuring rapid domestic utility. However, an excessive focus on inward-looking designs risks creating isolated ledger silos that fragment liquidity and impede cross-border efficiency.
India's next step should be to help shape the technical and legal standards that will govern cross-border tokenised markets. Drawing on its experience with DPI, it can build systems that serve domestic priorities while remaining compatible with emerging global networks.
India's strategic alignment is already visible on at least two fronts. Though India has not been explicitly named as a central bank participant in Project Agorá, a BIS-led initiative exploring tokenization for wholesale cross-border payments, the country’s emphasis on interoperable digital public infrastructure positions it well for future global integration. The RBI’s discussions on CBDC interoperability with global central banks further underscore India’s commitment to fostering a connected and efficient global tokenized market, balancing domestic regulatory priorities with the need for international alignment.
India's long-term advantage will depend on engaging early in global standard-setting alongside multilateral institutions. Doing so would preserve regulatory autonomy while ensuring that its financial system remains compatible with the evolving architecture of cross-border tokenised finance.