Calling for a new legal framework to modernise investing, AAP parliamentarian Raghav Chadha urged India to adopt a dedicated tokenisation law. In recent remarks, he argued that a clear rulebook could open up asset ownership to more people and cut costs for everyday investors. His pitch adds urgency to a debate on how India should regulate digital versions of real-world assets.
Chadha said tokenised assets could offer better returns, improved liquidity and stronger retirement security for the middle class. He also argued that digital records of ownership can lower fees and settlement times that often burden small investors.
“A dedicated tokenisation law in India can democratise asset ownership and make investing more inclusive.”
“Asset tokenisation could help the middle class gain better returns, liquidity and retirement security while reducing transaction costs.”
What Tokenisation Means for Investors
Tokenisation is the process of converting ownership rights in assets—such as real estate, gold, bonds or funds—into digital tokens. These tokens can be traded or fractionally owned, lowering the threshold for entry. For households that struggle with high minimums or lock-in periods, smaller units and faster settlement can be attractive.
India has seen rising interest in fractional ownership of property and private market funds. But these structures often sit in grey areas and depend on complex contracts. A formal law could set standard rules for issuance, trading, custody, tax treatment and investor protection.
The Policy Gap and Regulatory Questions
India regulates securities, commodities and payments through different agencies. Digital tokens tied to real assets cross these lines. That leaves questions about which regulator oversees what, and how to police market abuse, disclosure and suitability for retail buyers.
Chadha’s proposal points to the need for clarity on several fronts:
- What counts as a tokenised security versus a utility token.
- How to handle KYC/AML rules and on-chain records.
- Standards for custody, audits and smart contract controls.
- Tax rules for token issuance, trading and income.
- Dispute resolution and investor redress.
Without guardrails, tokenisation can expose buyers to fraud, poor disclosure, or technical failures. Clear standards on audits and platform resilience would be central to any law.
Global Signals and Lessons
Other markets provide reference points. The European Union has adopted a digital-assets rulebook and continues to refine rules for tokenised securities. Singapore’s regulator has run pilots for tokenised funds and bonds under tight compliance controls. Switzerland recognises ledger-based securities in law, enabling banks to handle tokenised instruments under familiar rules.
These examples suggest two paths: allow tokenisation within existing securities frameworks, or create a new category with tailored requirements. In either case, consistent disclosures, licensing, and clear settlement rules are key.
Potential Impact on India’s Markets
A law could open new channels for financing and savings. Small businesses might issue tokenised debt with lower costs. Real estate developers could sell fractional interests with better liquidity. Mutual funds, REITs and InvITs may find new distribution models.
For households, smaller ticket sizes and faster redemption could help with retirement planning and emergency needs. Lower fees and transparent on-chain records can reduce friction. Yet the benefits depend on design. If platforms pass on high spreads or add hidden charges, small investors may not gain.
What a Sensible Framework Could Include
Policymakers and market experts describe several building blocks for a workable regime:
- Licensing for issuers and token platforms, with fit-and-proper checks.
- Clear disclosures in plain language for retail buyers.
- Independent audits of asset reserves and smart contracts.
- Limits on sales of complex tokens to unsophisticated investors.
- Interoperable standards to avoid market fragmentation.
- Tax clarity on capital gains, income and withholding.
Pilot programs can test settlement, custody and investor communications before a wider rollout. A phased approach could start with well-understood assets like government bonds or gold.
Balancing Access and Safety
Chadha framed the idea as a middle-class policy. Wider access matters if it does not raise risks for new investors. Strong enforcement, transparent pricing and education would be needed to prevent mis-selling. Coordination among financial regulators would help keep rules consistent and avoid gaps.
The debate ahead is not only about technology. It is about trust, fairness and how savings move through the system. The design choices will decide whether tokenisation reduces costs and adds liquidity, or simply adds new layers without real benefit.
Chadha’s call adds momentum to an ongoing policy conversation. Lawmakers now face a practical task: write rules that open access while protecting buyers. If India can align standards, tax policy and enforcement, tokenisation could become a useful channel for savings and capital formation. The next steps to watch include draft legislation, regulatory pilots and industry input on investor safeguards.
