From cash to code: How tokenisation is reshaping India's economy

In the dynamic realm of digital finance, I believe tokenisation has emerged as a pivotal concept set to redefine traditional investment paradigms and foster liquidity across diverse sectors in India.

Tokenisation fundamentally involves transforming asset rights into digital tokens on a blockchain, symbolising ownership or a share in tangible assets, from real estate and art to company stocks and commodities.

The allure of tokeniation lies in its capacity to democratise investment access, enabling small investors to engage in markets previously inaccessible to them. As India advances towards a digital economy, understanding the intricacies of tokenisation is imperative for navigating this transformative landscape effectively.

Tokenisation stands as a catalyst for significant transformations across various sectors in India. Fractional ownership made possible through tokenising properties in real estate breaks down entry barriers, broadening investment access.

Similarly, in the art and collectibles market, tokenisation facilitates fractional ownership of high-value pieces, democratising access beyond exclusive circles. Moreover, farmers can utilise tokenisation to garner capital by selling fractional stakes in future production or land, presenting a novel avenue for financing agricultural endeavours while granting investors exposure to this sector.

Additionally, tokenisation holds potential for drawing investment towards renewable energy ventures, fostering the expansion of sustainable energy infrastructure.

Consider a historic property valued at Rs 100 crore, aiming to raise capital for renovation through tokenisation. By creating 1,000,000 digital tokens, each representing a 0.0001% stake in the property, investors can participate in premium real estate with relatively small investments. An investor purchasing 100 tokens for Rs1,00,000 would own a 0.01% stake in the property.

As the property appreciates post-renovation, token values increase, enhancing liquidity in the market. However, widespread adoption of tokenisation in India hinges on overcoming several challenges, including regulatory clarity, investor protection measures, tax implications, and technological infrastructure.

Regulatory clarity is paramount for the successful integration of tokenisation into India's financial landscape. Transparent guidelines governing token issuance and trading, aligned with existing financial regulations, are necessary to ensure market integrity and investor confidence.

Additionally, measures must be implemented to safeguard investors against fraud and enhance transparency throughout the tokenisation process. Establishing a regulatory framework that balances innovation with investor protection is essential for fostering trust and encouraging widespread adoption of tokenisation.

Moreover, clarifying the tax implications of digital tokens is crucial to mitigate confusion and ensure compliance. Clear guidelines on how token transactions are taxed, whether as capital gains, income, or other forms of taxation, are necessary to provide certainty to investors and facilitate proper reporting to tax authorities.

Furthermore, robust technological infrastructure, including secure blockchain platforms and digital wallets, is imperative for supporting the tokenisation ecosystem.

Developing scalable and interoperable blockchain solutions, coupled with user-friendly digital wallets, will enhance accessibility and usability, driving adoption across various demographics.

The Indian government's commitment to initiatives like the Digital India campaign underscores its openness to adopting technologies that promote economic inclusivity and streamline efficiency.

By addressing policy hurdles, India can cultivate an environment that nurtures the advancement of tokenisation, unlocks economic potential, and spurs innovation across industries.

In summary, as India progresses towards a digitalised future, embracing tokenisation offers a chance to democratise finance, fuel economic expansion, and empower individuals to partake in wealth generation. Establishing the necessary foundations today can chart a path towards a more equitable and prosperous future.

Ashish Khandelwal, Founder and CEO of ANQ