RBI’s Vasudevan flags legal, privacy, interoperability risks in tokenization

Mumbai: Legal uncertainty, data privacy, liquidity, interoperability and the risk of excessive concentration could pose significant challenges as India expands tokenization of financial assets, Reserve Bank of India executive director P. Vasudevan said on Wednesday.

“Initial costs are there. There are issues of legal clarity, legal certainty, data privacy, data movement, consent management, those are some challenges. So, we need to be mindful,” Vasudevan said during a fireside chat on financial assets of tokenization at the Global Fintech Fest 2026.

Tokenization is the process of representing an asset’s ownership and transaction records digitally on a blockchain or distributed ledger.

Avoiding fragmented or concentrated tokenization platforms would be another key challenge, he said. “If there are two or three platforms doing similar things, how do we actually make them interoperable?” Vasudevan asked, adding that interoperability has been one of the success stories of India’s payments ecosystem and should not be lost in the move towards tokenized assets.

He said tokenization could make financial transactions move faster and increase leverage. “If you increase the leverage, and it involves issues of risk or stability, you have to be looking at that,” he said. “In some situations, if money moves too fast, and if you are not able to stop it somewhere, that again could be an element.”

The role of existing market intermediaries would also have to be reimagined rather than simply eliminated, he said. Depositories, custodians, clearing corporations, and exchanges could potentially evolve into token service providers or offer tokenization as a service, he added.

The RBI has already tested tokenization through its Unified Markets Interface, with about 248 certificate-of-deposit transactions worth ₹17,000 crore processed so far, according to Vasudevan. About two-thirds of these transactions were in the secondary market. He said tokenization can potentially cover the entire lifecycle of an asset from issuance and trading to settlement, interest payments and servicing.

The RBI is also studying broader applications, including bank-deposit tokenization. Vasudevan said markets in Europe, the UK, the US and Asia are experimenting with such models, while cautioning that the regulatory and financial-stability implications need to be considered. Tokenization of gold is also being looked at overseas, he said.

He said the RBI is keen to expand the number of asset classes that can be tokenized.

“Tokenization is for the future,” Vasudevan said, while stressing that its expansion requires both optimism and caution.

His comments come as tokenized corporate bonds move from experimentation to actual fundraising. On Monday, state-run power financier REC raised ₹500 crore through India’s first pilot issue of tokenized corporate bonds maturing on 31 May 2028 at a coupon of 7.30%. The issue had a base size of ₹100 crore and a green-shoe option of ₹400 crore.

Larsen & Toubro also raised ₹500 crore on Wednesday through a similar mechanism, with bonds maturing in three years at a coupon of 7.40%.

Unlike a traditional bond, where ownership and settlement pass through established securities-market infrastructure, tokenized bonds can enable digital recording and potentially near-instant settlement. The underlying instrument remains a bond, with the issuer liable for coupon payments and repayment of principal at maturity.

The REC issue was part of a broader project being developed by the Reserve Bank of India and the Securities and Exchange Board of India to test tokenized corporate bonds. It uses the RBI’s wholesale central bank digital currency for payment and a blockchain-based securities wallet, referred to as “DEMAT 2.0,” for holding securities.

Only investors with active security and CBDC wallets are ‌allowed to place bids for the issue.

The technology could eventually reduce settlement risk, improve transparency and automate parts of the bond lifecycle. Tokenization can also allow fractional ownership, potentially lowering investment sizes and broadening participation in corporate bonds.

However, market participants have flagged the need for supporting infrastructure and a sufficiently liquid secondary market for the technology to scale up.