By Manhar Garegrat, Country Head – India, Liminal Custody
Tokenisation is picking up speed in India. You see it everywhere now — private credit pilots, experiments with real-world assets, and fresh trials in financial markets. Suddenly, tokenisation isn’t just a buzzword. It’s showing up in board meetings and catching the eye of policymakers. Advocates say it can boost liquidity, make transactions more transparent, speed up settlements, and open new doors to trillions of dollars of value in locked capital.
But even with all this talk, big institutions aren’t exactly rushing in. Banks, funds, and regulated players are still on the sidelines. They’ll join a pilot, sure, but when it comes to putting tokenised assets on their books in a big way, they hesitate.
Some chalk this up to a lack of appetite for innovation. That’s not what’s really going on. The real roadblock runs deeper: institutions don’t see the trust infrastructure they need. And custody sits right at the center of that.
Why institutions see tokenisation through a different lens
People often assume institutions will behave like retail crypto users. That’s not true. Retail chases speed, easy access, and the thrill of quick gains. Institutions move differently. They want proof. They care about governance, fiduciary duty, clear auditing, and the ability to recover assets if something goes wrong.
For an institution, holding or issuing a tokenised asset isn’t just a tech upgrade. It’s a big decision. Who actually controls the asset? Where are the keys? What if someone loses access? How do you prove ownership if there’s a dispute or audit? And does this asset fit with all the legal and regulatory hoops they have to jump through?
Until institutions get solid answers, answers as detailed and reliable as they’d expect for any traditional security, tokenisation won’t leave the sandbox. It won’t become part of day-to-day finance.
Custody: it’s not just about storage
People hear “custody” and think “wallet management” or “key storage.” For institutions, that’s missing the point. Custody is about governance. It means keeping assets separated from the custodian’s own assets, enforcing controls so there’s no single point of failure, recording every move for audits, ensuring compliance, and having a recovery plan if things go sideways.
Traditional finance has these frameworks nailed down. Every asset is ring-fenced, every access point is controlled, every action is checked against policy, not left to someone’s whim. Tokenised assets need the same treatment.
Without these safeguards, tokenisation piles up operational and legal risks. And institutions aren’t built to shoulder that kind of uncertainty.
India’s regulator-first approach
In India, finance starts with the regulators. The system leans heavily on investor protection, stability, and compliance, not on racing ahead with new technology. That’s how banks and institutions approach anything new, tokenisation included.
The rules for digital assets and tokenisation keep shifting, but one thing’s clear: Indian institutions won’t jump ahead of what regulators expect. Tax rules, reporting, accountability, these factors shape every adoption decision. And it’s not enough to just follow global trends; firms here have to fit tokenisation into the country’s own legal frameworks.
Even the pilots being carried out by the Maharashtra government under the guidance of Hon. Chief Minister, Mr. Devendra Fadnavis are looking at aligning Maharashtra’s real estate tokenisation ambitions to legal and regulatory frameworks that can be developed in close cooperation with the regulators.
This puts custody, marketplaces, trading, and financial products built around tokenisation, front and center. Reliable frameworks around all these elements aren’t just technical details; they are the link between blockchain innovation and the demands of Indian regulators. Without clear regulations governing custody, marketplaces, trading, and the financial products themselves, institutions can’t join the tokenisation movement without risking compliance or their duty to clients.
The role of custody and custodians
For tokenisation to move past small pilots and into real business, the foundation of custody has to hit a high bar.
Because all wallets in the blockchain arena come with private keys that need to be secured, one has to start with key management. Institutions need bulletproof systems, multi-party computation (MPC), multisig setups, so no single person in the operational chain can go rogue or gain unauthorized access. Next, asset segregation matters. On paper and in code, institutions have to keep their assets clearly separated and protected in separate wallets which can be audited 24/7 thanks to blockchain tech.
Needless to say, while auditability is non-negotiable, firms also need transparent logs, approval workflows, and records that plug into their risk and audit systems. And then there’s recoverability: if something goes wrong, an operational failure, someone leaves, or there’s a legal dispute, there must be solid processes for getting assets back. For long-term investors, these aren’t optional.
Scaling up: from pilots to the real world
Tokenisation works, technically. That’s been proven. But making it work for big institutions is a different story. Without trusted custody and strong governance, tokenisation risks becoming just another experiment, not a real part of mainstream finance.
India stands to gain a lot. If done right, tokenisation could make markets more efficient, open up new kinds of assets, and put the country at the forefront of responsible financial innovation. But this won’t come from shiny new protocols, it hinges on getting the core infrastructure right.
Custody doesn’t get much attention, but it’s what either opens the door for institutions or keeps them out. It’s the piece that lets regulators engage seriously and allows tokenised assets to enter formal finance.
What comes next
India’s next chapter in tokenisation won’t be written by faster launches or more pilots. It’s about building trust, getting custody, governance, and recoverability right, so that tokenisation can move from the lab to the real economy. Without this foundation, even the best ideas won’t get past the testing phase.
In institutional finance, enthusiasm isn’t enough. Progress depends on trust. That’s what scales innovation.
