New Delhi: Every year, gold worth trillions of rupees sits locked away in Indian homes and temples, doing little beyond remaining stored. Alongside it, hundreds of millions of tonnes of wheat, cotton and metal move through markets that are large but still operate largely on paper. This gap between India’s commodity wealth and its financial use is the problem tokenisation is built to address.
Tokenisation means representing ownership of a real asset—a gram of gold, a bale of cotton or a tonne of copper—as a digital token on a blockchain: a shared, tamper-proof digital record that can be verified. A token’s worth depends on whether it is backed by a verifiable claim on the commodity, held in proper custody, with a clear path to redemption. Done right, it allows large, indivisible assets to be split into small, affordable units, enables ownership to be transferred instantly rather than through paperwork, and makes records easier to verify, reducing the scope for fraud.
The virtual digital asset (VDA) industry has been the biggest driver in turning this idea into a working market. Globally, tokenised commodities now carry a monthly transfer volume of $7.12 billion across roughly 3.2 lakh holders and more than 40 tracked products. Gold-backed tokens dominate: Paxos Gold and Tether Gold together account for close to three-quarters of the market, with each giving holders a claim on real gold held in audited vaults and redeemable through the issuer. Crypto exchanges, digital wallets and blockchain infrastructure, built by the VDA industry, have made this fractional, round-the-clock trading possible, with smart contracts—self-executing code—automating settlements that once took days of paperwork.
India does not yet have a live, blockchain-based tokenised commodity market, but it already has much of the groundwork such a market would need. Electronic Gold Receipts, introduced by SEBI in 2021, allow investors to hold and trade gold through demat accounts backed by audited vaults. Electronic Negotiable Warehouse Receipts, regulated by the WDRA, allow farmers and other commodity holders to digitally transfer title to grain and cotton stored in registered warehouses. These systems address one of the hardest parts of the problem: proving electronically who owns what. What they lack is the crypto layer that could make that ownership tradeable in small fractions to a wider pool of investors. India’s digital public infrastructure—Aadhaar, UPI and DigiLocker—paired with a fast-growing base of crypto exchanges already handling onboarding and compliance, gives the country many of the pieces needed.
What is missing is not technology but architecture. SEBI governs commodity derivatives and gold receipts, the WDRA governs warehouse receipts, and no single authority yet governs how a token would sit on top of either. The International Financial Services Centres Authority has taken a first step, releasing a 2025 consultation paper that sets out key principles: a clear legal link between token and asset, credible custody, defined redemption rights, and separation between issuer, custodian and trading platform. This applies only within India’s international financial centres so far, not the wider domestic market.
Not every commodity is equally ready. Gold and metals such as copper and aluminium score highest, since they trade on transparent exchanges, carry accepted quality grades and are held in regulated, audited storage. Wheat and cotton hold promise too, especially for farmer financing, but face hurdles including uneven warehouse quality, prices influenced by procurement policy and large lot sizes that can keep smaller investors out.
This is where crypto exchanges and registered virtual asset service providers (VASPs) can play a genuine role—not as a replacement for existing institutions, but as the connective layer above them. A VASP can handle investor onboarding, embed identity and anti-money-laundering checks into a token’s lifecycle, and provide trading infrastructure to make fragmented markets more liquid. This would keep legal title anchored in existing warehouse and gold receipts while making those assets usable by a wider set of investors and lenders.
For policymakers, the task ahead is clear: build a regulatory perimeter linking tokens to enforceable property rights, rather than leaving each regulator to work alone, and recognise the crypto and VDA industry as a potential partner in building this market’s trading and custody layer. Done well, this is not simply a financial product; it could become a way to unlock capital sitting idle in Indian households and farms, using the same technology that has turned tokenisation into a fast-growing global asset class.
