what really changes when you tokenise a fund
Here is a basic truth about modern finance that people tend to forget until someone invents a new buzzword: almost nothing you own in the financial system is a physical thing.
If you own 100 shares of Apple, nobody mails you 100 pieces of parchment stamped with a wax seal. You don't even hold the shares directly. Cede & Co., the nominee of the US central depository, is the registered holder, your broker has an entry in its database saying it owes you 100 shares, and an app on your phone renders the number "100" next to an Apple logo.
Finance is ledgers. It is databases talking to other databases, occasionally disagreeing, waiting a day or more to settle up, and paying back-office teams to reconcile the two when something breaks.
Which brings us to tokenisation.
Strip away the jargon and the idea is simple. Tokenisation is recording a legally recognised claim on a financial asset as a digital token on a programmable ledger. A bond remains a bond. A fund unit remains a fund unit. What changes is the plumbing: how ownership is recorded, how transfers settle, and how the rules travel with the instrument.
That sounds mundane. But mundane plumbing is where most of finance's cost and risk actually sit.
What tokenising a fund changes, and what it doesn't
Take a money market fund. It is a good product: you give a manager cash, they buy short-term government debt, take a small fee and pass you the rest.
Franklin Templeton's US government money fund (the BENJI token) and BlackRock's BUIDL fund are the best-known examples. Underneath, they are ordinary money market portfolios, with a manager, a custodian, an administrator and a daily net asset value. What is different is the share register. Each investor's holding is a token on a blockchain rather than a line in a transfer agent's private database. In Franklin's case, the blockchain record is the fund's official record of who owns which shares.
That one change does a surprising amount of work. Holdings can move between eligible investors outside banking hours. BUIDL holders can exchange their shares for USDC at any hour through a facility run by Circle, the stablecoin issuer. And several crypto exchanges, including Deribit, Crypto.com and Binance, now let qualified institutional clients post tokenised money fund shares as trading collateral, so an investor can use a yield-bearing asset as margin instead of selling it first.
The asset hasn't changed. The wrapper around ownership has. Finance has done this before. Demat did not change what a share was, only its form. Paper certificates became depository entries, friction dropped, and markets grew. Tokenisation is the next step: not just electronic record-keeping, but programmable record-keeping.
Why it isn't the Wild West: permissioned tokens
The obvious worry for anyone in a compliance role is this: if a fund unit is a token, can't anyone send it to anyone?
No. Regulated tokenised funds use permissioned tokens. One widely used open standard for this, ERC-3643, works roughly like a share register with the transfer rules built in:
- every holder has a verified onchain identity, linked to their KYC, AML and eligibility checks.
- a transfer only goes through if the receiving wallet belongs to a verified, eligible investor and the fund's own rules (for example, limits on the number of investors or on which countries investors can come from) are met.
- the issuer can freeze tokens, and can recover them to a new wallet if an investor loses access.
In other words, the eligibility checks a fund already runs at onboarding are enforced again on every single transfer, automatically. That is arguably tighter control than a traditional register.
The feeder model: the underlying fund stays exactly as it is
One structure is worth understanding in particular, because it is a common way for private credit to come onchain.
In January 2025, Apollo and Securitize launched ACRED, a tokenised feeder fund that gives accredited investors access to Apollo's existing Diversified Credit Fund. The tokens are the feeder's units. The underlying credit fund is not tokenised: from its side, the feeder is one more investor, subscribing under the fund's normal terms. The tokenised layer, and the investor onboarding that comes with it, sit in the feeder.
For a fund manager, that is the key point. Tokenisation does not have to touch your fund. It can sit one layer above it.
Why India, and why now
India is already moving. In September 2026, under SEBI's regulatory sandbox and with RBI's support, REC, L&T and IIFL Finance issued around ₹1,025 crore of tokenised corporate bonds on a permissioned ledger run by the depositories, with settlement in wholesale CBDC. The pilot shows India's domestic market plumbing can be upgraded within the existing regulatory framework.
The larger opportunity is access. India's private credit market offers yields that many global investors want, but reaching it today still means registrations, multiple intermediaries, currency hedging and settlement measured in days. Meanwhile a large pool of onchain dollars, held as stablecoins, has no straightforward regulated route into Indian credit.
GIFT City is well placed to close that gap. It is India's International Financial Services Centre, with its own regulator, IFSCA, and business there is conducted in foreign currency, separate from the domestic rupee system. IFSCA has consulted on a framework for tokenising real-world assets and runs a FinTech Regulatory Sandbox for testing new models like this one.
That is what aarnâ's India Yield Platform is being built to do. Its first product, the India Credit Token, is designed to give eligible offshore investors exposure to Indian performing credit through a GIFT City vehicle, using an approach similar to the feeder model above: the underlying funds are not tokenised, and every holder is verified onchain.