Land tokenisation using tech will unlock huge opportunities: Siddharth Shetty, co-creator, Finternet

Siddharth has previously worked as an advisor to the Union Finance Ministry on Digital Public Infrastructure, and was involved in designing the India Stack, personal health records for Ayushman Bharat Digital Mission, DigiYatra for aviation travel, and Digital Sky for integrating drones into civilian airspace. He was also the co-founder of Sahamati, an industry alliance that works on Account Aggregator adoption as intermediaries for data sharing with user consent.

Siddharth spoke to indianexpress.com on the need for Finternet, the challenges it would face for adoption in India, the value that it could unlock, and the safeguards that tokenisation of assets would have. Edited excerpts:

Venkatesh Kannaiah: Can you explain the benefits of the tokenisation of land?

Siddharth Shetty: Today, people find it difficult to buy or sell assets like land or apartments, as there are multiple regulatory agencies and systems, and these agencies and systems do not interact with each other. There is the survey department, which holds the maps, the revenue department, which holds the records of your ownership rights of the land, the property registration department where your land or apartment is registered in your name, and the municipal body where you pay your property tax. A lot of the time, the data on your property is contradictory in these databases. So, if you want to sell, buy, or pledge your assets, there is a huge bureaucratic process, and it would take quite some time.

Imagine if it were tokenised; made simple as if one were holding a share in the stock market and that would make it easy to sell, buy or raise money using the land/apartment asset. In simple terms, it means that the tokenisation would authenticate that you own the asset, say land, and there are no loans on the same, show a clear title, and would help in easier transactions of the title.

Such a tokenisation of land/apartment assets would help not merely in financial transactions like buying, selling, and pledging but would also help in inheritance planning, loans on parts of the property, and even simplify rental agreements.

Nearly two-thirds of all civil cases in Indian courts are related to land. The average time to resolve a case is 15 years. The economic cost of this inefficiency is huge. Our GDP can be boosted simply through land record digitalisation.

One must understand that lack of a tech-like tokenisation and how it has impacted India. India ranks 154th globally in the World Bank’s Ease of Doing Business index for registering property. On average, it takes 58 days to complete a property registration here, compared to three days in some countries. Land dispute resolution is ranked at 136th globally, with an average resolution time of 1445 days versus the global average of 358 days.

Apart from its impact on real estate, it has uses in a wide variety of areas, like agricultural markets and simplifying access to healthcare and education through tokenised vouchers. It could support the issuance of green bonds for sustainable projects, manage carbon credits more effectively, or facilitate the distribution of subsidies for energy-efficient tech.

Venkatesh Kannaiah: Can you explain the tech behind land tokenisation?

Siddharth Shetty: The tech behind tokenisation is the tech behind Finternet per se; it is a combination of public blockchain, credentialing tech, wallets and token management. It is based on the principles of interoperability, immutability, and composability. It establishes a foundational architecture for decentralised, interoperable financial ecosystems. It also has open networks as a critical component.

At its core, land tokenisation converts rights associated with real estate and property into tokens recorded on an immutable ledger. These tokens are not just digital certificates. They carry details of the asset rights, ownership history, legal rights, restrictions and real-time updates. The asset is not just represented, but can be interacted with, transacted on and in a trusted manner. With tokenisation, land assets can become easily verifiable. A plot can be divided into fractional units and transferred.

The real world and digital assets will be represented as tokens which are self-describing and self-contained, and which can be chained together.

The advances in cryptography in verifiability, security, and privacy make it a trustworthy exercise.

Finternet also enables quick dispute resolution, provides for a lifetime history of all assets, and helps with online dispute resolution with digital evidence and easier auditing. It could save much time spent in disputes in court.

Venkatesh Kannaiah: What is Finternet and how is it linked to land tokenisation?

Siddharth Shetty: Land tokenisation is one small part of the whole of Finternet. Finternet looks at tokenisation of other assets too, like vehicles, stocks, gold, silver, agricultural assets and even energy resources.

Finternet emerged from a paper co-authored by Nandan Nilekani and Agustín Carstens of the Bank for International Settlements. It was later developed by Nandan Nilekani, Pramod Varma, and me.

Venkatesh Kannaiah: Has it been tried anywhere else, and what has been the response or learnings?

Siddharth Shetty: There are a lot of pilots going on across the world, in the US, UK, Latin America, Middle East, and places like Korea. In some places, certain assets have been tokenised. These pilots are also looking at the various legal aspects of tokenisation. The key is to see that it works at scale. Korea is talking about tokenisation of its agri produce and meat products.

In Dubai, land tokenisation is being tried out in closed user groups. In India, too, pilots are going on in Mumbai among lenders of financial products.

Venkatesh Kannaiah: How long do you think it would take for land tokenisation in India, if it is accepted as a policy?

Siddharth Shetty: The tech is maturing very fast, and within three to five years, I predict that we could see adoption of some facets. My reading is that within 10-15 years, Finternet will take off worldwide in a big way. In India, confusion exists, and clarity needs to be developed on different aspects of digital assets, crypto, tokenisation, and cryptographic infrastructure.

What needs to be understood is that tokenisation is not just for financial services, it’s critical for even availing basic services around property management. We are working on technology that is safe, secure and reliable. We understand that if there are not sufficient safeguards, it would not pass regulatory scrutiny or even public approval.

In simple terms, it is a technology like Android for smartphones, an underlying tech. On top of it are apps for users, built by various companies for various sets of users. It is wrong to blame Android for an app that is not helpful or does not work.

Now, the Union government has come up with a draft bill to replace The Registration Act of 2008. The draft bill, which has been placed for public feedback, introduces provisions to support online registration, electronic presentation and admission of documents, issuance of electronic registration certificates, and digital maintenance of records.

Venkatesh Kannaiah: How would it be implemented?

Siddharth Shetty: We have set up Finternet Labs in India and the US. They are also being set up in Singapore and Switzerland. These would test the hypothesis on the ground, work with early adopters, test the legal frameworks, and other issues. We are working with various stakeholders across the globe to mainstream this idea and the tech.

The adoption of this tech would be asynchronous. It would not be linear. Some governments or regulators would latch on early, and not everyone and every aspect would go live at the same time. It would be in phases. Perhaps among the states in India, there would be some early adopters, but it is also a learning process.

It would be like the Aadhaar and UPI adoption in India. Studies by experts said that it would take five decades for Aadhaar to be adopted in India. It got off within a decade. From five million merchants in 2016 to fifty million did not take much time. The same was the growth from 30 million users to 500 million users for UPI. We see the Finternet taking off in a non-linear and exponential manner.

Venkatesh Kannaiah: What are the challenges for such land tokenisation in India?

Siddharth Shetty: The hurdles would be of three types. First would be building the tech infrastructure, with a focus on digitisation of land records and digitisation of other databases. And it should also reach a certain maturity.

Second would be the legal frameworks and changes in legal and public policy around land tokenisation. There is a need to remove the legal and regulatory barriers that hinder the adoption of new technologies, particularly those related to tokenised assets.

Third would be the challenge of onboarding and enabling the commercial partners for this ecosystem, which would help these partners to unlock new markets and meet consumer needs. It would also require collaboration between the public and private sectors. Public authorities should build digital infrastructure, establish regulations, while the private sector should lead in providing the services.