UPSC Prelims 2026 Q91: Real-World Asset Tokenization — Explained

Which of the following statements about Real-World Assets (RWA) Tokenization are correct?

1. Tokenization is the process of turning real world assets into digital tokens using blockchain technology.

2. Tokenization of real world assets offers 24 × 7 access, promoting financial inclusion.

3. Tokenization of real world assets will allow the access to high growth investment opportunities for individuals in India.

  1. 1, 2 and 3
  2. 2 and 3 only
  3. 1 and 2 only
  4. 1 and 3 only

Answer: (a) 1, 2 and 3

Statement-wise explanation

  • 1: correct — This is the standard definition. Tokenisation records the ownership of a real-world asset (a bond, a building, gold, invoices) as digital tokens on a blockchain, also called a distributed ledger. The RBI uses the same idea when it describes tokenised Certificates of Deposit settled in wholesale CBDC (e₹-W).
  • 2: correct — A blockchain ledger has no business hours, so tokens can be transferred and settled 24 × 7 and almost instantly. Traditional markets and land registries close after working hours and take time to settle. Round-the-clock access, combined with smaller ticket sizes, is why tokenisation is presented as a tool for financial inclusion.
  • 3: correct — Tokenisation lets one high-value asset be split into many small tokens (fractional ownership). This brings the minimum investment down to a level ordinary individuals can afford. Investments that were once open only to institutions or very rich investors, such as commercial real estate or private credit, become reachable. RBI Governor Sanjay Malhotra has said asset tokenisation can expand access in Indian financial markets.

How to eliminate

Statement 1 is a definition and is plainly true. That rules out the one option that leaves it out. Statements 2 and 3 are the two benefits always claimed for tokenisation: always-on markets and fractional ownership. If you know that tokens live on a blockchain that never closes and can be split into small pieces, both follow. Neither statement uses an absolute word like 'only' or 'always' that would make it suspect. UPSC is testing basic awareness of the benefits here, not technical detail. The fact to remember: tokenisation = blockchain record of ownership + fractional ownership + 24 × 7 settlement → wider access.

Know more

Real-World Asset (RWA) tokenisation converts the ownership rights in a physical or financial asset into digital tokens on a distributed ledger. Each token is a claim on part of the underlying asset. That separates it from a cryptocurrency, which has no asset behind it.

How it works

  1. A legal structure holds the asset (for example, a trust or SPV that owns a building).
  2. Tokens are issued on a blockchain, and each one represents a share of that asset.
  3. Smart contracts run transfers, interest or rent payouts, and compliance checks automatically.
  4. Settlement uses a digital form of money. The RBI says wholesale CBDC (e₹-W) can be the settlement anchor for a tokenised market.
Feature Traditional asset Tokenised asset
Minimum ticket Large (whole unit) Small (fraction)
Trading hours Market or office hours Potentially 24 × 7
Settlement T+1 or longer, many intermediaries Near-instant, on-ledger
Record Separate registries Shared, tamper-resistant ledger
Liquidity Low for real estate, art, private credit Higher, with a secondary market

India's approach

  • The RBI runs wholesale CBDC pilots. Its use cases include tokenised issuance and settlement of Certificates of Deposit.
  • The RBI has a CBDC and Asset Tokenisation (CAT) Sandbox for testing innovations.
  • The RBI remains cautious about private cryptocurrencies but supports tokenising regulated assets such as bonds.

Risks: legal enforceability of token ownership, custody and cyber risk, valuation of illiquid assets, and regulatory arbitrage. These risks are why regulators use sandboxes first.

In the news

In 2025–26 the RBI pushed asset tokenisation through wholesale CBDC pilots, including tokenised Certificates of Deposit, and a CBDC and Asset Tokenisation sandbox. The Governor also spoke publicly about tokenisation expanding access to financial markets. The RBI's caution on crypto alongside its support for tokenising real assets made RWA tokenisation a live current-affairs topic before Prelims 2026.

NCERT Concepts to Revise

  • Asset tokenisation: The question is about this concept. Its definition is the basis for judging what tokenisation does and does not involve.
  • Blockchain: Tokens live on a blockchain ledger, and the ledger's always-on, tamper-resistant nature drives the claimed benefits.
  • Cryptocurrency: Helps separate asset-backed tokens from cryptocurrencies, which have no real-world asset behind them.
  • Regulatory sandbox: The RBI tests asset tokenisation inside a regulatory sandbox before allowing wider use.

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