India Has a Gold Problem. Could Tokenisation Unlock It?
How a UK regulatory debate could offer a new way to think about India’s vast stock of idle gold
India’s Gold Paradox
The United Kingdom is asking a question that India may eventually have to ask on a much larger scale: can gold move through the financial system as easily as a digital asset while the underlying metal remains safely in a vault?
On 14 September 2026, the UK Financial Conduct Authority (FCA) opened a Call for Input on tokenised gold, asking whether digital tokens representing physical gold could make the metal easier to trade, transfer, pledge and hold. The consultation closes on 23 October. The immediate focus is the wholesale market, particularly the possibility of using tokenised gold as collateral.
For India, the more important question is not what London does with its gold market. It is what India could do with the gold it already has.
India is one of the world’s largest gold importers, while a huge stock of the metal remains held by households and institutions. Government estimates have long pointed to more than 20,000 tonnes of gold in India, much of it neither traded nor monetised. That creates an unusual economic contradiction: India keeps spending foreign exchange to import gold while large quantities of gold already inside the country sit idle.
Why Gold Has Become an Economic Question
Gold is not just a household asset in India. It is also an import bill.
The pressure becomes more visible when global disruptions push up the cost of energy and other imports. The current geopolitical environment, including disruption linked to West Asia, has added pressure to India’s external finances and currency. Gold imports have moderated recently, but the underlying structural dependence remains.
The government has already tried to address this. The Gold Monetisation Scheme, introduced in 2015, was designed to mobilise gold held by households, trusts and institutions and put it to productive use, while reducing India’s reliance on imports over time.
The scheme, however, did not bring anything close to the scale of household gold into the formal system that policymakers had hoped for. In March 2025, the government discontinued the Medium-Term and Long-Term Government Deposit components of the scheme, while allowing Short-Term Bank Deposits to continue at the discretion of banks.
That decision matters. It suggests that the problem is not simply that Indians own too much gold. The problem is that the existing mechanism has not made it attractive or convenient enough to bring that gold into circulation.
The Question Is No Longer Just How Much Gold India Imports
The next policy question is therefore more interesting: can India make better use of the gold that is already here?
Prime Minister Narendra Modi has also urged Indians to reduce gold purchases, reflecting the government's concern over the country's dependence on imported gold. But reducing new purchases addresses only one side of the equation.
The other side is the enormous stock of gold already sitting in homes, bank lockers and other private holdings.
If even a portion of that gold could be securely deposited, verified and represented through a regulated digital claim, it could potentially become more useful without requiring the physical metal to change hands every time ownership changes.
That is where tokenisation enters the conversation.
What Tokenised Gold Actually Changes
Tokenisation does not create more gold. It changes the way ownership of existing gold can be represented and transferred.
In a basic structure, physical gold remains with a custodian or vault while a digital token represents a defined ownership interest in that metal. The token can then potentially be transferred electronically, subject to the rules governing the platform and the asset.
The distinction is important. India already has digital gold products, gold ETFs and other financial instruments linked to gold. Tokenisation is different in its potential infrastructure: the underlying metal can remain securely held while the ownership claim becomes programmable and transferable on a digital ledger.
The economic opportunity is therefore not simply 'digital gold'. It is the possibility of turning an otherwise idle physical asset into something that can participate more efficiently in the financial system.
A household could potentially deposit eligible gold, receive a verified digital claim, transfer that claim or use it within a regulated financial framework, while the underlying metal remains in custody.
That is the unlock worth examining.
Why the UK Debate Matters to India
The FCA’s current consultation is useful because it shows that the regulatory questions around tokenised gold are moving from theory to market infrastructure.
The FCA is considering whether existing rules are sufficient or whether clearer guidance, a targeted exemption or a bespoke regulatory framework may be required. One of the issues is whether certain gold tokens could fall within collective investment scheme or alternative investment fund rules.
The regulator is also asking how tokenised gold should deal with ownership rights, custody, redemption, audit, valuation, disclosure and insolvency.
Those are not British questions alone. They are the foundation of any credible tokenised-gold market.
India would have to answer the same questions before tokenisation could become an economic tool rather than another investment product. Who legally owns the gold? Is the gold allocated and identifiable? Who holds it? How frequently is it audited? Can the holder redeem it, and within what timeframe? What happens if the issuer or custodian fails? What happens to the token in insolvency?
If these questions cannot be answered clearly, tokenisation simply replaces one form of uncertainty with another.
The Bigger Opportunity: Unlocking Idle Wealth
The scale of India's opportunity lies in the stock of gold already owned by Indians.
The government does not need to persuade households to sell all their gold. In fact, that is unlikely to be culturally or financially attractive for many families. Gold carries savings, inheritance and security value.
A better-designed system could give owners another option: retain economic exposure to gold while allowing the underlying metal to enter a regulated financial and lending ecosystem.
For banks and other financial institutions, tokenised gold could eventually offer a more efficient form of collateral, provided the legal claim is clear and the underlying gold is securely held. For the wider economy, bringing idle assets into formal channels could improve financial intermediation and reduce the need to rely entirely on fresh imports to meet investment demand.
That does not mean every tonne of household gold can suddenly become productive capital. Nor does tokenisation automatically reduce imports. The economic benefit would depend on participation, regulation, custody infrastructure, pricing, redemption and, most importantly, whether households actually trust the system enough to use it.
India Already Has a Digital Gold Habit
There is one reason the idea is not as distant as it sounds: Indians are already becoming comfortable with digital forms of gold ownership.
The World Gold Council reported that digital gold purchases in India averaged around Rs 25 billion a month between June and August 2026, with August purchases more than double the level a year earlier. That does not mean digital gold and tokenised gold are the same thing. They are not.
But it does demonstrate something important: the consumer behaviour around owning gold digitally is developing.
The next step, if policymakers choose to pursue it, would be to build a regulated architecture around the physical gold already held in India. That would require more than a digital interface. It would require a credible chain linking the physical bar, the legal ownership record, the custodian and the digital token.
What Could Still Go Wrong
The biggest risk is assuming that putting gold on a blockchain automatically makes it safer or more useful.
It does not.
A token can be transferred in seconds while the underlying gold is improperly allocated. A platform can show a balance while the vault does not hold the corresponding metal. A holder can have a digital claim that becomes difficult to enforce when an issuer fails.
There is also the question of whether tokenised gold becomes another speculative product rather than a mechanism for mobilising existing wealth. If regulation focuses only on the technology and not on ownership, custody and redemption, the system could create a new layer of financial risk without solving the old problem.
The twelve areas being examined by the FCA — including legal rights, custody, redemption, independent audit, valuation, disclosure and orderly wind-down — offer a useful checklist for India as well.
Tokenisation works only when the token is a legally enforceable claim on something that actually exists.
The Economic Unlock India Should Examine
India’s gold problem has traditionally been framed as a demand problem: Indians buy too much gold, so imports rise.
That is only half the story.
The other half is that Indians already own an enormous quantity of gold that remains outside the productive financial system.
This is why the failure to scale the Gold Monetisation Scheme matters. The lesson may not be that Indians do not want to monetise gold. It may be that the financial product has to fit the way Indians actually think about ownership, liquidity, inheritance and security.
Tokenisation could offer one possible bridge between those preferences and the needs of a modern financial system.
The UK is now examining whether tokenised gold can make the wholesale market more efficient. India has a different starting point: a much larger pool of privately held gold and a longstanding policy objective of reducing dependence on imports.
If India can create a system in which physical gold remains securely held but its ownership can be verified, transferred and potentially pledged digitally, the prize is bigger than a new investment product.
It is the possibility of putting some of the country's idle wealth back to work.
That is the real question behind tokenised gold. Not whether gold can become digital, but whether India's existing gold can become more economically useful without asking households to give up the asset they value.
Research references used for the current-event layer
Financial Conduct Authority, “Tokenised gold – opportunities and risk for UK wholesale markets”, 14 September 2026.
Government of India / Press Information Bureau, Gold Monetisation Scheme update, 25 March 2025.
Indian Economic Service, Government of India, Gold Monetisation Scheme background and objectives.
World Gold Council, India gold market updates, May and September 2026.
Reuters, India trade data and gold imports, 15 September 2026.