Investors would be able to purchase government securities and other bonds using digital currency in their wallets.
This would have the twin benefit of widening digital currency usage beyond the simple merchant payments at present and also help boost retail participation in the government bond market.
Tokenisation of assets refers to the process of creating a digital representation of an asset, called a token, on a blockchain network. “Discussions have happened between banks and the RBI around tokenisation of assets,” said a senior banker aware of the developments.
“However, these are still in exploratory stages and will take time to become a reality,” the banker said, declining to be named.
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Emailed queries to the RBI on the subject remained unanswered till the time of going to press.
Another banker said this would help create an ecosystem around CBDC (central bank digital currency). Currently, the adoption of the RBI-backed digital currency is limited given they can only be used to make payments.
“In case of retail payments, consumers are already using the Unified Payments Interface. Hence, convincing them to park a certain part of their savings account holdings into a separate digital wallet has not been received with enthusiasm,” said the second banker.
“If government securities are tokenised, then they should ideally be bought with digital currency, which would make the settlement system instantaneous,” he said, adding it would encourage CBDC adoption.
The keep-it-simple systems could be built on Hyperledger Fabric, the existing blockchain ledger that supports CBDC in its current format, he added. Hyperledger Fabric is an open-source project from the Linux Foundation and is capable of supporting enterprise-scale blockchain solutions.
On November 24, ET wrote how the banking regulator was exploring use cases around offline payments and feature phone-based payments to be built on CBDC rails. On Thursday the Union finance minister said that the RBI and the government are working closely to use CBDC for cross-border payments.
Both bankers added that further brainstorming and ideation are required for banks and the RBI’s innovation hub. But these are some early thoughts the central bankers are engaging in, they said.
Banks are incentivising customers to start using digital currency for their daily transactions. Now, with tokenisation of deposits, more use cases are expected.
RBI data showed that in FY23, the total value of digital currency in the country stood at only Rs 16.4 crore, with Rs 10.7 crore in wholesale assets and Rs 5.7 crore held in retail assets. The regulator had given a target of a million transactions to be settled by banks daily by the end of December 2023.
Industry insiders say that the target has not been met on a daily basis. On December 29, Governor Shaktikanta Das said in a letter to the RBI staff that on December 27, a million transactions were reported on the CBDC retail network.
Global Developments
A recent report, ‘Deposit Tokens: A foundation for stable money’ by Onyx, a blockchain-based platform run by American lender JP Morgan and consultancy firm Oliver Wyman, explored the idea around deposit tokenisation.
“Blockchain-based deposits are equivalents of existing deposits recorded in a novel form used to pay, settle trades between digital assets, and generally act as a store of value and means of exchange,” the report said.
This technology can make transactions instant and improve transparency, thereby helping in cross-border payments and liquidity management, a key focus area for banks, the report mentioned.
Besides some early explorations, the idea was implemented in a pilot programme run in Hong Kong by Visa. The global card payment major tokenised bank deposits of HSBC and Hong Kong-based Hang Seng Bank onto their respective blockchains.
“The two payment flows tested in this pilot are property payments and merchant settlements focused on the Hong Kong market,” Visa said in a report published after the pilots were conducted.
ET has seen a copy of this report.
Investors would be able to purchase government securities and other bonds using digital currency in their wallets.
This would have the twin benefit of widening digital currency usage beyond the simple merchant payments at present and also help boost retail participation in the government bond market.
Tokenisation of assets refers to the process of creating a digital representation of an asset, called a token, on a blockchain network. “Discussions have happened between banks and the RBI around tokenisation of assets,” said a senior banker aware of the developments.
“However, these are still in exploratory stages and will take time to become a reality,” the banker said, declining to be named.
Discover the stories of your interest
Emailed queries to the RBI on the subject remained unanswered till the time of going to press.
Another banker said this would help create an ecosystem around CBDC (central bank digital currency). Currently, the adoption of the RBI-backed digital currency is limited given they can only be used to make payments.
“In case of retail payments, consumers are already using the Unified Payments Interface. Hence, convincing them to park a certain part of their savings account holdings into a separate digital wallet has not been received with enthusiasm,” said the second banker.
“If government securities are tokenised, then they should ideally be bought with digital currency, which would make the settlement system instantaneous,” he said, adding it would encourage CBDC adoption.
The keep-it-simple systems could be built on Hyperledger Fabric, the existing blockchain ledger that supports CBDC in its current format, he added. Hyperledger Fabric is an open-source project from the Linux Foundation and is capable of supporting enterprise-scale blockchain solutions.
On November 24, ET wrote how the banking regulator was exploring use cases around offline payments and feature phone-based payments to be built on CBDC rails. On Thursday the Union finance minister said that the RBI and the government are working closely to use CBDC for cross-border payments.
Both bankers added that further brainstorming and ideation are required for banks and the RBI’s innovation hub. But these are some early thoughts the central bankers are engaging in, they said.
Banks are incentivising customers to start using digital currency for their daily transactions. Now, with tokenisation of deposits, more use cases are expected.
RBI data showed that in FY23, the total value of digital currency in the country stood at only Rs 16.4 crore, with Rs 10.7 crore in wholesale assets and Rs 5.7 crore held in retail assets. The regulator had given a target of a million transactions to be settled by banks daily by the end of December 2023.
Industry insiders say that the target has not been met on a daily basis. On December 29, Governor Shaktikanta Das said in a letter to the RBI staff that on December 27, a million transactions were reported on the CBDC retail network.
Global Developments
A recent report, ‘Deposit Tokens: A foundation for stable money’ by Onyx, a blockchain-based platform run by American lender JP Morgan and consultancy firm Oliver Wyman, explored the idea around deposit tokenisation.
“Blockchain-based deposits are equivalents of existing deposits recorded in a novel form used to pay, settle trades between digital assets, and generally act as a store of value and means of exchange,” the report said.
This technology can make transactions instant and improve transparency, thereby helping in cross-border payments and liquidity management, a key focus area for banks, the report mentioned.
Besides some early explorations, the idea was implemented in a pilot programme run in Hong Kong by Visa. The global card payment major tokenised bank deposits of HSBC and Hong Kong-based Hang Seng Bank onto their respective blockchains.
“The two payment flows tested in this pilot are property payments and merchant settlements focused on the Hong Kong market,” Visa said in a report published after the pilots were conducted.
ET has seen a copy of this report.