Gold has always been one of India’s most trusted assets. But what if owning gold one day becomes as digital as making a UPI payment?
The Reserve Bank of India (RBI) is exploring the possibility of tokenising gold through its Unified Markets Interface (UMI), a digital platform being developed to support the tokenisation and settlement of financial assets. The idea is still under exploration, but it could represent another major step in India’s digital finance journey.
What exactly is tokenised gold?
Tokenisation means representing an asset and its ownership digitally using technology such as blockchain or distributed ledger technology.
In simple terms, instead of ownership and transaction records being maintained only through traditional systems, they can be represented digitally as tokens.
For gold, this could potentially allow ownership or claims linked to gold to be represented digitally and transferred through a regulated financial infrastructure.
However, this does not mean that physical gold will suddenly disappear or that every gold bar will automatically become a digital token.
Why is RBI exploring this?
The RBI is looking at expanding its Unified Markets Interface beyond the financial instruments it has already tested.
The UMI allows tokenised assets to be settled using wholesale Central Bank Digital Currency (CBDC). RBI has already experimented with tokenised certificates of deposit and is now considering whether other asset classes, including gold, could be brought into the ecosystem.
The broader objective is to create infrastructure where the asset and the payment can potentially settle together, reducing the gap between the transfer of an asset and the corresponding payment.
Could tokenised gold make investing easier?
Potentially, yes.
Tokenisation can make it possible to divide an asset into smaller digital units. This could support fractional ownership and make certain assets easier to transfer or trade.
It could also create more programmable transactions. For example, rules related to ownership, transfers or collateral could potentially be built into the digital system.
But these are potential benefits of the technology, not features that RBI has announced for a retail gold product.
Is this the same as digital gold?
Not necessarily.
India already has several ways to get digital exposure to gold, including Electronic Gold Receipts (EGRs), which are regulated securities linked to physical gold and can be held in demat form.
RBI's exploration of tokenisation is different. It is focused on using tokenisation infrastructure to represent assets digitally and potentially settle them using central bank digital currency.
So, “tokenised gold” should not simply be treated as another name for the digital gold products people already use.
What are the challenges?
The RBI has also highlighted that tokenisation comes with risks.
These include:
Legal clarity around digital ownership
Data privacy and consent
Interoperability between different platforms
Concentration of activity on a few platforms
Faster movement of assets and money
Potential leverage and financial-stability risks
The RBI has therefore indicated that the benefits of tokenisation need to be balanced against these risks before such systems are expanded.
What could this mean for the future?
If gold tokenisation eventually becomes part of India's regulated financial infrastructure, buying, transferring or using gold as a financial asset could become increasingly digital.
It could also connect traditional assets such as gold with newer financial infrastructure involving blockchain, CBDC and programmable transactions.
But for now, there is no announced nationwide RBI launch of tokenised gold for retail investors. The RBI is exploring the concept as part of its wider work on asset tokenisation.
The bigger picture
India's financial system is moving beyond simply digitising payments.
The next phase could involve digitising the assets themselves.
From UPI for payments to CBDC and tokenised securities, the financial system is gradually experimenting with new digital infrastructure. RBI's exploration of tokenised gold is another indication of where that evolution could go next.
