Zoho co-founder and chief scientist Sridhar Vembu on Wednesday highlighted a major red flag in Infosys co-founder Nandan Nilekani’s idea of ‘tokenization of land assets.’
In an X post, Vembu remarked that increasing the liquidity of every financial asset would lead to extreme concentration. Explaining with an example he said, “a person with a gambling or drinking problem could now easily monetize a part of their home to fund their habit.”
“This idea ‘tokenization of land assets to unlock wealth’ relies on the crucial assumption "making every asset liquid and tradeable is always a value creating activity". In other words, make every asset more money-like,” Vembu said.
The Zoho cofounder calls this assumption the ”Fundamental Axiom of Financialization” which is very seductive. Yet, he says we financialise every asset and thereby increase their moneyness.
Vembu further said that “finance is seduction” and the idea that extreme liquidity can lead to ruin is not far-fetched. He added that as soon as the idea of tokenization is executed, companies will arise to offer "instant cash out" of tokens on farm land, homes and so on and he is afraid “where this path would lead.”
Nilekani’s Idea
Nilekani highlighted that approximately 50% of Indians' assets are tied up in land, which often remains locked, unsellable, and ineligible for loans. This limitation restricts economic mobility and access to financial resources for many individuals across the country.
“This land is an asset, but you cannot do anything with it,” Nilekani said. “You can’t sell it, you can’t take a loan against it. It’s like an asset that’s there, but it’s just sitting there, unable to be utilized.”
Nilekani proposes an idea to unlock the potential of such land assets through tokenization. He believes that tokenizing land assets and making them tradable on a secure ledger, similar to financial assets like stocks or bonds, could enhance liquidity, improve transparency, and facilitate easier access to credit.
“We believe that tokenisation of land assets, using a proper ledger, can unlock these things,” Nilekani added.
