RBI to Introduce Pilot for Deposit Tokenisation Using CBDC Layer: Report

The Reserve Bank of India (RBI) is set to begin a pilot on deposit tokenisation this week, exploring how blockchain-based digitally backed deposits can enhance efficiency, security, and transparency in financial transactions. According to a report citing Chief General Manager Suvendu Pati, the exercise will use the wholesale segment of the RBI's central bank digital currency (CBDC) as the underlying layer, with a few partner banks participating. The project aims to test how tokenised deposits can function within regulated financial markets. 

Decision Aims to Modernise Banking Systems With Blockchain Technology

At an event in Mumbai, Pati told Reuters that regulatory integrity will remain central to the initiative. “From a regulatory standpoint for tokenisation of an underlying asset, we believe integrity and enforceability have to be established,” he said, adding that strong regulatory security measures can help in reducing risks associated with tokenisation. 

This initiative will also explore potential use cases that go beyond deposits. The RBI's Chief General Manager also indicated that to increase the scope of blockchain application in the financial systems, the central bank is considering tokenising the money market instruments, including commercial papers. Through these tokenised instruments, regulators hope to improve settlement efficiency and reduce systemic risks. 

The government had previously launched a wholesale CBDC pilot in 2022 to facilitate the settlement of government securities market transactions. A retail CBDC pilot (e₹-R) was rolled out on December 1 2022, targeting person-to-merchant (P2M) and person-to-person (P2P) transactions in select cities. 

By March 2024, Retail CBDC usage had increased substantially, with outstanding retail CBDC rising from around Rs. 5.3 crore to Rs. 234 crore, which means the digital asset saw a 39-fold increase within a year.

Deposit tokenisations are being explored by regulators and financial institutions as a method to modernise banking infrastructures on a global scale. By combining blockchain innovations and regulatory backing, this move represents another step in the central bank's broader digital strategy. The outcome of this experiment will pave the way for how tokenised financial assets are integrated into our mainstream markets.