In just a few years, India has rewritten the global script on digital finance. We now see over 20 billion transactions monthly through Unified Payments Interface (UPI), a figure that has turned scanning a QR code into a national reflex. Yet, despite the incredible breadth that UPI has achieved, it lacks depth, confined to the LVHV purgatory (low-value, high-volume).

The asymmetry lies in the fact that we have solved how money moves but not how it is invested.

So, while retail payments and, more recently, small-ticket lending have been democratized, much of India’s capital markets remain expensive and slow, with participation still concentrated among institutions and high-net-worth investors.

Tokenization enters this picture as a practical response to these familiar problems. At its simplest, it involves representing a real-world asset (bonds, real estate, the family goat, what have you) as a digital unit on a shared ledger. The asset itself does not change – only the recording, reconciliation, and settlement of its ownership and transfers do.

By splitting up large and traditionally illiquid assets into smaller, digital units, tokenization promises broader access. In theory, owning a fraction of a building or a government bond could feel just as simple buying a mutual fund on a mobile app. Until recently, this promise largely lived in slide decks and sandboxes, with little common infrastructure to support it at scale. That has changed with the RBI introducing the Unified Markets Interface or UMI.

UMI is designed to do for investment markets what UPI did for payments; it aims to make the movement of financial assets faster, cheaper, and more reliable. It provides a common, regulated platform through which real-world assets can be tokenized, traded, and settled.

With pilots already underway, including the tokenized issuance of Certificates of Deposit, the conversation on UMI has moved past whether this technology will arrive to the more critical task of getting the implementation right. More on this in our main course stories.

Now, onto the FinTales menu for the month:

Main Course 1: An immutable take on how UMI is trying to teach India’s capital markets some UPI-style agility, and why this is proving to be easier said than settled.

Main Course 2: A shiny piece on how digital gold in India has lost its lustre, and what India’s regulatory goldsmiths are doing (or not) about it.

Dessert: Sweet news about payments getting their holiday cheer.

Mints: Refreshers on the latest fintech developments.

Main Course 🍝

Token Efforts or Market Revolution? Asset Tokenization Meets UMI

All assets are equal, but some representations are more immutable than others.”

- George Orwell (if tokenization of the family goat becomes reality)

Imagine a world where buying and selling complex financial assets is as quick as sending a payment through your phone. This is the reality envisioned by the RBI through its latest offering, the Unified Markets Interface or UMI. Introduced in October 2025 at the Global Fintech Fest by RBI Governor Sanjay Malhotra, UMI is a platform that allows users to convert their real-world assets (RWAs) into secure digital tokens that can be easily traded on blockchain networks.

Understanding UMI and Digital Infrastructure

To understand the mechanics of UMI, we must first look at India’s Digital Public Infrastructure (DPI). UMI is not a standalone platform, it is a new layer built using and on top of DPI’s foundation. To visualize DPI, it helps to think about how a city works. Just as a city needs roads, bridges, and flyovers to allow people to move from one place to another, DPI creates digital highways for the flow of information and money.

As it stands, the DPI stack includes an identification layer through Aadhaar, a payments layer through UPI, a data governance layer through DigiLocker, and a lending layer through the Unified Lending Interface (ULI). In a seamless operation, a customer can avail a loan using ULI, complete KYC verification for the loan using Aadhaar retrieved from DigiLocker, and complete repayments through UPI.

UMI fits into the ecosystem as a digital highway specifically designed for the investment market. While UPI was built to move money, UMI is built to move the ownership of financial assets.

How will UMI work?

UMI provides the platform to tokenize assets by acting as a universal translator for all sides of the market. It assigns a standardized digital identity to an RWA so that it can plug into a secure blockchain ledger in a uniform format. Think of the ledger as a shared, immutable electronic record book that instantly records ownership of this digitised asset.

Once tokenized, these tokens are traded, and the payment is settled using the wholesale variant of the Central Bank Digital Currency (wCBDC). CBDC is a digital version of the Indian Rupee issued directly by the RBI. The ‘wholesale’ variant is specifically designed for financial institutions like banks to use for large transactions.

The reason UMI uses wCBDC instead of familiar tools like UPI is to achieve atomic settlement. In simple terms, atomic settlement is where transfer of the asset and the payment happen simultaneously – as a single, inseparable event. In a UPI or netbanking transaction, while the notification is instant, the actual settlement between banks happens in batches later in the day. UMI cannot afford this delay because of the risk that a trade could fail halfway through.

By using CBDC, the asset and the money exist on the same shared ledger, making the trade programmable (i.e., the asset and money are programmed to move simultaneously). The transfer becomes ‘all or nothing’; if the buyer does not have the funds or the seller does not have the token, the trade will simply not be executed.

The Current Stage of UMI

The RBI has tested the platform through pilots of tokenized issuance of Certificates of Deposit (CDs). However, CDs only show that this is viable for debt instruments. The real potential lies in expansion to a wider range of asset classes - government securities, corporate bonds, real estate, and equity. These avenues are where participation broadens and the opportunities for real financial inclusion kick in.

What Actually Changes When Assets Become Tokens?

While the technical architecture of UMI is complex, its value is best understood through the specific market problems it fixes. By acting as the primary pipeline for tokenized assets, UMI addresses several long-standing frictions that have traditionally slowed down the movement of capital.

•        Fractional, finally: Large, high-value assets such as real estate or private equity can be divided into smaller digital units, each representing a slice of ownership. This lowers entry barriers, allowing a wider range of investors to access what was once accessible mainly to institutional or high-net-worth investors.
•        T + too much: Traditional settlement cycles of one or two days introduce a period of limbo where either party may default or go bankrupt before the asset or payment is actually delivered. UMI solves this by ensuring asset transfer and settlement occur simultaneously, and in a single step.
•      Follow the yellow block chain: Transactions on UMI are recorded on an immutable ledger meaning once a trade is confirmed, its record cannot be altered or deleted. Through cryptographic security, every entry is linked to the previous one. Since altering one record would require changing all subsequent blocks, unauthorized tampering is rendered impractical.
•       Compliance by design: UMI deploys smart contracts (self-executing code residing on the blockchain) to embed actions like dividend payments and transfer restrictions into the asset itself. This ‘compliance by design’ format could very well be the best thing since sliced bread; reduced need for manual oversight while still maintaining complete control over the asset.
•      Liquidity injections galore: Assets like real estate, art and collectibles are rarely in a hurry to change hands. Tokenization makes these assets easier to divide, transfer, and value. Fractions can be traded more frequently or used as collateral, bringing some liquidity to corners of the market that have traditionally stayed arid.
•      Markets, after hours: Removing human workflows from the equation means markets would no longer need a home time when the bell rings. Trading and settlement can continue beyond regular hours, keeping capital in motion.

Implementation Speed Breakers

Adopting novel technology like tokenization is bound to introduce some frictions. UMI’s ability to navigate these speed breakers will determine its scaling success across the financial system:

•        Systems, meet systems: To avoid creating digital siloes, different blockchain networks must be able to communicate with each other and with existing regulatory systems. Infrastructure like common token definitions and messaging formats will have to be adopted for successful scalability.
•         Settlement finality: In traditional markets, settlement finality is well-understood. For example, for securities, a trade is final when a clearing corporation confirms the transfer. The settlement is final at this point even if later, one of the parties encounters a material failure. With UMI, settlement finality looks to be possible either at the ledger stage (when the owner is updated on the ledger) or at the settlement stage. Clarity on when a transaction becomes legally irreversible would be vital for thorough regulation.
•        Clarity before capital: A token can represent many things - direct ownership, a contractual claim, or a beneficial interest. Consensus and clear disclosures are needed so investors understand what rights are attached to a token and how those rights are enforced.
•        Assets sans borders: The borderless nature of blockchain networks means that the speed of transferring tokenized assets may outpace what regulatory frameworks are currently ready for. By integrating with the DPI stack’s identity and data layers, UMI provides a unique advantage for maintaining traceable, compliant cross-border flows with minimal friction.
•         The tax question: As tokenization brings familiar assets onto digital rails, will they be taxed as per their digital form or as per their underlying asset category? Adoption may stall if assets are taxed differently simply because they are tokenized – more due to lack of clarity and less due to lack of interest.

The Road Ahead

UMI builds on the same DPI logic that made UPI and ULI effective at scale. Identity, payments, lending, and data already work together in retail finance, and UMI extends those synergies into capital markets.

A useful page out of UPI’s book for UMI would be the intentionality of its rollout. UPI succeeded because it did not try to do everything, everywhere, all at once. It was built on open architecture and scaled through clear, sequenced phases. From a risk perspective, core rails were standardized early and new use cases were added only after stability was proven. From an innovation perspective, participation was open to a range of players through simple yet effective light-touch licensing.

UMI can inherit these lessons by staying modular, interoperable, and institution-neutral, while expanding asset classes in measured steps.

Regarding regulation, the novelty of tokenization may justify an overly careful approach, but the path forward need not be unfamiliar. The RBI could consult the IFSCA’s two-pronged approach: controlled experimentation through regulatory sandboxes and self-regulation supported by a disclosure-based regime. If aligned well, the RBI stands to maintain the fine balance between innovation and regulation.

Saving the Glitter of India’s Digital Gold Industry

Gold has always occupied a curious place in the Indian financial imagination. It is at once a cultural artefact, a hedge against inflation, and a store of value. Over the last few years, however, it has taken on a new form – digital gold.

Today, millions of Indians buy gold not just from jewellers or banks, but also through apps – often in denominations as small as Rs. 10. With a few taps, users acquire a fractional interest in physical gold stored in a vault somewhere, waiting to be delivered if and when they choose. For first-time investors and younger users, digital gold is a low-friction entry point into saving and investing. It looks familiar, feels safe, and demands little financial literacy or paperwork. The scale of adoption is striking. In the first nine months of 2025 alone, Indians bought over Rs. 9,000 crore worth of digital gold, with monthly purchases rising from Rs. 762 crores in January to Rs. 1,410 crores by September.

And yet, despite its popularity, digital gold operates in a regulatory grey zone.

Unlike other gold-linked products, it does not sit squarely under the supervision of any financial sector regulator. In 2021, there were reports that SEBI may classify digital gold as a security, though the move never materialised. Even so, the regulator’s discomfort has become clear. SEBI has asked entities regulated by it to stay away from digital gold, reiterated that it does not regulate the product, and cautioned the public against dealing in it. Recent reports suggest that the Ministry of Finance is gathering industry inputs on how digital gold should be regulated. Industry bodies, too, are pushing for clarity. In 2024, the World Gold Council urged the Ministry of Finance and the RBI to introduce a formal framework, and last month, the India Bullion and Jewellers Association (IBJA) formed a self-regulatory division (SRD) to improve governance and transparency among digital gold players.

For anyone who has followed Indian fintech growth trajectory over the last decade, this must feel familiar.

A decade ago, peer-to-peer (P2P) lending platforms stood at similar crossroads. They promised to democratise credit, connect borrowers and lenders directly, and offer retail investors better returns. Like digital gold today, P2P lending grew rapidly in a regulatory vacuum, driven by convenience, persuasive storytelling, and retail participation. And like digital gold, it raised uncomfortable questions: Was this lending, investing, or something closer to deposit-taking? Who ultimately bore the risk of default? Did any protections exist for retails investors?

In 2017, the Reserve Bank of India stepped in.

When RBI formally brought P2P platforms under the NBFC-P2P framework, the move was widely welcomed. Regulation brought legitimacy. Platforms were clearly defined as intermediaries, not lenders. They were asked to pool funds in escrow accounts and not their own accounts. Disclosure and grievance redressal requirements strengthened consumer protection. For regulators, it closed a gap on regulation. For users, it reduced the chances of harm.

But the costs for the business were immediate.

Strict caps on lending and borrowing volumes disrupted business models overnight. Compliance obligations rose sharply, forcing smaller players to shut down. Growth slowed, experimentation stalled, and investor enthusiasm cooled as P2P lending began to look like a tightly constrained and low-margin business. Most importantly, regulation arrived before the industry had discovered its most scalable and sustainable form. P2P lending survived – but largely as a contained niche, and not the transformative credit market it once aspired to become. After that, whenever the P2P lenders tried to overstep the regulatory bounds, the regulator came down heavily with the most notable action in 2024 which disrupted many market practices.

This is the cautionary tale that the digital gold industry should be paying close attention to.

Digital gold today displays the same characteristics that made regulators uneasy about P2P lending: heavy retail participation, lax KYC measures, simplified messaging that can blur the line between savings and investment, and platform structures with overlapping marketplace, custodian, and financial intermediary roles. When these ambiguities persist, regulators tend to respond not with nuance or precision, but with the mindset to contain immediate risks.

Digital gold still has a narrow window to influence its regulatory arc through following measures:

First, product integrity must be non-negotiable. Each unit of digital gold should be fully backed, at all times, by equivalent physical bullion held in secure vaults. Many platforms already rely on reputed custodians such as MMTC-PAMP. Liquidity, too, must be guaranteed. Customers should be able to redeem or sell their holdings at prevailing market prices without friction. Any ownership or redemption risks erode trust rapidly.

Second, transparency should be made a priority. Digital gold providers should publish regular, independently verified audits reconciling customer balances with vault holdings. Mutual funds already operate under similar disclosure expectations. IBLJ’s SRD has also prescribed independent periodic audits of gold stored in vaults of digital gold players or their vault partners. Fee structures, too, need clarity. Storage charges, GST, spreads, and insurance costs vary widely across apps and are often buried in fine print. Hidden costs were a major source of mistrust in P2P lending; digital gold would do well not to repeat that mistake.

Third, voluntary compliance should precede regulation. One lesson from P2P lending is that self-regulation, when adopted late, offers little protection against a regulatory reset. A credible industry SRO – setting standards on custody, redemptions, disclosures, and marketing – can persuade regulators to adopt a light touch approach. IBJA has already taken a step in this direction by forming the SRD.

Fourth, risk must be disclosed clearly. Gold prices fluctuate; operational and counterparty risks exist; and the product does not enjoy sovereign or deposit insurance. SEBI has already cautioned that digital gold operates outside its regulatory perimeter and carries risks. Platforms should reflect this reality clearly. Avoiding language such as ‘assured returns’ or ‘yield’ is not merely good practice – it is essential to preventing the misplaced trust that later triggers regulatory backlash.

Finally, treading the line drawn by existing regulated frameworks can also be a wise step. SEBI-regulated gold ETFs, exchange-traded gold receipts, and even sovereign gold bonds already offer investor protections and auditability. Even partial alignment with these guardrails for regulated instruments would reduce regulatory anxiety and anchor the product within familiar safeguards.

Each of these measures can address the weaknesses that eventually impacted the P2P lending market: unclear guarantees, opaque risk allocation, aggressive growth ahead of governance, and regulation that arrived late but landed hard. These measures will limit the risk of the industry being recharacterized under a framework designed to limit risks rather than enable growth.

P2P lending’s experience shows that once visible retail harm – or even the perception of it – emerges, the possibility of light touch regulation fades. For digital gold, saving the industry’s glitter may depend less on how fast it grows, and more on how responsibly it grows before the rules are written.

Dessert 🍨

Payment Rails à la Mode

After mining (pun fully intended) through the complexities of digital gold and tokenized assets, we end on an equally punchy note. Think of this as the lemon meringue of FinTales – sweet, light, and fittingly hopecore.

The final weeks of 2025 brought some much-needed holiday cheer, with the RBI and NPCI clearing the license logjam A long list of players, including Airpay, PayNearby, Mswipe, Razorpay, Pine Labs, PayGlocal, Easebuzz, and Infibeam, recently secured various regulatory nods.

Under the RBI’s new payment aggregator Master Direction (PA-MD), PAs now require separate licenses for online, offline and cross-border operations. This has prompted a scramble for “all-terrain” status, with many players completing their stack across all three channels.

Most resilient of the lot has to be Paytm, which has finally finished a regulatory marathon. Enduring everything from investor scrutiny to onboarding freezes, Paytm Payments Services has secured licenses for the full range of payment aggregation. marking a major win for the digital payments pioneer.

We end with a dollop of nostalgia this month. Rediff, the original gateway to the Indian internet for many of us, is back in the spotlight. The NPCI granted it a TPAP license for RediffPay, allowing it to officially join the UPI ecosystem. Seeing Rediff in a fintech headline proves to be a full-circle moment with the dial-up tone being quietly replaced by the ding! of a successful UPI transaction. 

 Mints 🍃

🛑 RBI to curb mis-selling of financial products: The Reserve Bank of India plans to issue comprehensive instructions for regulated entities on advertising, marketing and sales to prevent the mis-selling of financial products to consumers. This move, highlighted in RBI’s latest banking report, aims to strengthen consumer protection and address harms from inappropriate or misleading product sales.

🚨 DoT provides update on adoption of FRI for fraud prevention: The Department of Telecom (DoT) has announced that more than 1000 banks, TPAPs and Payment System Operators (PSOs) have been onboarded on the DoT’s Financial Fraud Risk Indicator (FRI). FRI flags mobile numbers associated with financial frauds and is as part of the DoT’s Digital Intelligence Platform (DIP).

🔐 NPCI mulling fetters on UPI Collect and Autopay features: NPCI may modify the functioning of certain UPI features which are prone to frauds.  NPCI also plans to reinforce stricter disclosure rules for Autopay so that customers can more clearly see and approve subscription-based payments.

🪙 SEBI flags review of EGR framework: SEBI has said the framework for Electronic Gold Receipts (EGRs) may need a review as adoption of the product remains weak. The regulator is examining structural, operational, and tax-related issues affecting uptake.

🤝 RBI recognises SRPA as SRO for PSOs: The Self‑Regulated PSO Association (SRPA) has been officially recognised by the RBI as a self‑regulatory organisation (SRO) for payment system operators (PSOs). Its members include firms such as Razorpay, CRED, Mobikwik and others.

📉 Aadhaar, digital payments cut India welfare leakage by 13% - BCG: As per a new report from the Boston Consulting Group, India has reduced leakage in public welfare payments by nearly 13%, with the help of Aadhaar-linked digital payments and fingerprint checks. Monetary public welfare benefits like work wages and subsidies are being received more quickly and accurately by beneficiaries. India’s rapid adoption of DPI in delivery of such benefits and payments has been quoted as the reason for this improvement. 

⚠ Fewer new third-party UPI apps authorised in 2025: The NPCI approved just 13 new third-party UPI apps in 2025, as it tightened due diligence and safety controls after a UPI outage in April 2025. This was lower than the 18 fully live apps authorised in 2024, reflecting a more cautious approach to scaling the ecosystem.

Image credits: AI-generated