We are currently witnessing a pivotal moment in the global interest towards tokenized finance. Tokenized real-world assets, from bonds to real estate and even skyscrapers, have been gaining global attention. India’s participation in this global movement depends largely on one factor: regulatory certainty.
Impact of Regulatory Clarity: Once India has regulatory clarity and consistency, tokenized real-world assets will legitimize the asset class, driving investor confidence, participation, and long-term market stability. Regulatory clarity effectively legalizes and standardizes digital assets, giving investors a clear understanding of taxation, trading rules, custody frameworks, and protections.
Current Indian Tax Regime: India’s current Virtual Digital Asset (VDA) tax regime imposes a 30 percent tax on gains and a one percent TDS (Tax Deducted at Source) on every transaction. This regime discourages high-frequency traders and short-term investors. Long-term investors benefit somewhat from the 12.5 percent tax rate under LTCG (Long Term Capital Gains) if assets are held for over 24 months, which remains beneficial for patient investors.
Benefits for Indian Retail Investors: For Indian retail investors, regulatory clarity will be transformative. If even a small slice of capital currently in SIPs and mutual funds is reallocated into tokenized assets post-clarity, the digital asset ecosystem could see significant liquidity growth. Tokenization brings the benefits of fractionalization and greater access for retail investors, which enhances market liquidity.
Tokenized assets also expand investor opportunities beyond traditional markets by providing access to tokenized real estate, bonds, private credit, and fractionalized high-value assets such as Bitcoin.
Once investors are assured that these digital representations are backed by legally recognized structures, the Indian population will be very interested in adopting this new asset class for wealth creation.
Global Examples of Regulatory Impact: Bitcoin ETFs in the US: The approval and acceptance of Bitcoin ETFs in the US highlights how regulatory clarity transformed Bitcoin from a speculative asset into an institutionally viable one. Since the ETFs received regulatory clarity, trillions of dollars’ worth of institutional capital gained access to Bitcoin overnight.
Tokenized U.S. Treasury Market: Once guidelines for stablecoin issuers and tokenized treasury products were in place, asset managers like BlackRock launched tokenized U.S. Treasury funds on-chain and a U.S.-reserve-backed token, BUIDL. These regulated tokenized instruments experienced rapid inflows and became some of the fastest-growing on-chain assets globally. This demonstrates how traditional assets can experience explosive growth once tokenized under a clear regulatory framework.
Attracting Global Institutional Capital: Once India replicates the adoption of global tokenized finance, it will also witness similar success patterns. Global institutional investors (from venture funds to asset managers) are actively exploring RWA (Real-World Asset) tokenization, but they require legal certainty before deploying large-scale capital in Indian markets. Clear regulations can attract global investors eager to collaborate, co-invest, and deploy liquidity into India’s digital asset infrastructure.
Market Liquidity and Sentiment: Traders, options participants, and market makers are essential for liquidity. Without determined rules, short-term traders tend to avoid unregulated bets. However, with structured regulations, markets become more volatile and liquid, sentiment improves, and momentum naturally builds upward.
Conclusion: The future of tokenized assets in India depends on how quickly its regulatory environment matches the pace of global standards and opportunities. Clarity will unlock innovation, invite international interest, and transform digital assets and tokenized real-world assets into a legitimate and credible asset class. By embracing this opportunity, India can position itself as a global leader in the tokenization ecosystem and participate in the next evolution of financial markets, with growing retail and institutional adoption.
CA Sonu Jain is one of India’s foremost experts on crypto taxation and digital asset regulation. He is the Chief Risk and Compliance Officer of 9Point Capital, a digital wealth platform enabling regulated access to global stocks and crypto ETFs for Indian investors.