
India Pilots Tokenized Deposits via CBDC — A New Dawn for Digital Banking
In a bold push toward financial modernization, India’s Reserve Bank (RBI) is preparing to roll out a pilot project that converts bank deposits into digital tokens, leveraging its central bank digital currency (CBDC) infrastructure. This initiative signals a shift from mere experimentation to systemic transformation—where money is not just digital, but programmable.
From Deposits to Tokens: Reimagining Money
Starting October 8, 2025, India’s pilot will allow certain commercial bank deposits to be tokenized. In practice, each traditional deposit account—holding rupees backed by the central bank—will be mirrored by a digital token on a blockchain. Transactions between institutions will then flow via these tokenized representations rather than conventional ledger entries. This change aims to speed settlement, enhance clarity, and increase resilience in financial flows. (ActuFinance.fr)
This is not the RBI’s first foray into digital money. Since 2022, it has deployed e₹-W, a wholesale CBDC for interbank transfers, serving as the backbone for institutional liquidity. The new tokenization pilot builds atop that foundation, exploring extensions into broader banking instruments. (ActuFinance.fr)
Equally notable: the pilot isn’t limited to deposits. The RBI is also exploring tokenization of money market instruments such as certificates of deposit (CDs), integrating them as fungible tokens settled via wholesale CBDC rails. (Ledger Insights)
Why India Is Doing This Now
There are multiple forces converging in favor of tokenized money:
Efficiency and finality: Tokenization can reduce settlement layers and counterparty risk, enabling atomic transfers between institutions.
Transparency and auditability: On-chain representation allows better traceability, aiding regulatory oversight and anti-money laundering efforts.
Programmability: More complex financial operations—automatic settlement, conditional transfers, embedded contracts—become feasible when money is code.
Interoperability: A unified digital money framework could bridge between CBDC, tokenized bank money, and even tokenized assets, creating a composable financial infrastructure. (See BIS / CGIDE analyses on tokenization’s transformative potential.) (Banque des règlements internationaux)
Of course, India also sees geopolitical and domestic opportunities. By strengthening sovereign control over monetary flows, the state can better anchor digital innovation within regulated bounds—countering unbacked crypto while advancing blockchain infrastructure domestically. The finance minister’s remarks suggest a belief that India’s digital currency will be more robust, intelligible, and sustainable than existing payment systems. (ActuFinance.fr)
Risks, Nuances, and Structural Tension
This transition is not trivial. Several key challenges and trade-offs must be addressed:
Deposit insurance & run risk: As noted in earlier RBI statements, tokenized deposits may alter the dynamics of bank runs. If withdrawals become instantaneous, stress events could cascade faster. (Ledger Insights)
Integrity and enforceability: The RBI emphasizes that any tokenization framework must embed legal certainty—ensuring that tokenized entities enforce the same rights and protections as traditional deposits. (ActuFinance.fr)
Interoperability and legacy systems: Banks’ existing systems must bridge to the new digital rails without disruption. Legacy backend infrastructure may impose costs and delays in integration.
Privacy vs surveillance: While transparency is a public good, citizens will expect that personal financial data does not become a tool for unwarranted surveillance. Designing cryptographic privacy layers—zero-knowledge proofs, selective disclosure—will be critical.
Adoption and inclusion: The digital divide could leave underbanked or rural users behind. Ensuring smooth onboarding, fallback mechanisms, and safeguards for low-tech users is essential for legitimacy.
What It Could Mean for the Banking Landscape
If India’s pilot succeeds and scales, it could reshape banking models:
Commercial banks might issue tokenized liabilities, competing in a programmable money architecture.
New liquidity markets could emerge, where tokenized deposits and CBDC funds interconvert seamlessly.
Financial innovation—such as embedded credit, real-time settlement, dynamic collateralization—could accelerate.
India might position itself as a blockchain-monetary technology pioneer, attracting global investment and expertise.
In short, what begins as a pilot may become foundational. India is not merely testing technology—it is contesting the future contours of money, control, and financial sovereignty.
Source: ActuFinance — “L’Inde mise sur la blockchain : la RBI teste la tokenisation des dépôts bancaires” (October 2025); supplemented by Ledger Insights, Economic Times, BIS reports.
Written by Brian Leclere