What Indian Regulators Must Clarify Before Boards Embrace RWA Tokenisation

Everyone seems to be talking about tokenisation these days.

At conferences, in LinkedIn posts, inside fintech webinars — it’s being described as the next big upgrade to how assets move around the world. Real estate, bonds, private credit, even gold… everything, apparently, will soon live on a blockchain.

But walk into an actual Indian boardroom, and the mood is very different.

Instead of excitement, you’ll hear careful questions:

Is this legal? Who regulates it? What happens if something goes wrong? And most importantly — will the board be held responsible?

This gap between global hype and local hesitation is not because Indian companies are afraid of technology. India adopted digital payments faster than almost any country. Our banks run some of the largest real-time systems in the world. Our startups build for scale by default.

The real issue is simpler.

Boards don’t move on trends. They move on clarity.

And when it comes to Real World Asset (RWA) tokenisation — turning things like property, bonds, or invoices into digital tokens that can be bought and sold — that clarity is still forming in India.

Some regulators are experimenting. A few pilots are running quietly in the background. Policy papers are being written. But for most board members, the rules still feel blurred. Different regulators, different interpretations. Tech moving fast. Law moving carefully.

So before tokenisation becomes a serious business decision — not just a slide in a strategy deck — Indian regulators need to answer a few uncomfortable but necessary questions.

This blog isn’t about selling tokenisation as magic.

It’s about understanding what must be clearly defined before Indian boards can touch it with confidence.

Let’s start with the basics.

RWA tokenisation holds promise but boards need regulatory clarity before adoption can truly scale.

So… what exactly is RWA tokenisation?

At its core, RWA tokenisation is not complicated.

It simply means taking something that already exists in the real world — like a building, a bond, a warehouse receipt, or even an invoice — and creating a digital version of its ownership on a blockchain.

That digital version is called a token.

Think of it like this:

Today, if you buy a corporate bond, your ownership is recorded in databases maintained by depositories, brokers, and registrars. Nothing physical changes about the bond. Only the record of who owns it changes.

Tokenisation does the same thing — but instead of updating five different databases, ownership is recorded on a shared digital ledger.

Let’s use a simple example.

Imagine an office building worth ₹100 crore.

Instead of selling the whole building to one buyer, the owner creates 10,000 digital tokens. Each token represents a small slice of that building. Investors can buy and sell these tokens, just like shares, while the building stays exactly where it is.

Nothing magical happens to the building. No bricks move. No walls become digital.

Only the ownership record becomes digital and programmable.

And that’s an important distinction:

Tokenisation does not create new assets. It changes how existing assets are recorded, divided, transferred, and settled.

It’s also very different from cryptocurrencies like Bitcoin.

Bitcoin has no underlying asset. A tokenised bond does. A tokenised property does. A tokenised gold bar does.

That difference matters a lot — legally, financially, and for regulators.

On paper, the benefits sound attractive:

• Faster settlement

• Lower paperwork

• Fractional ownership

• Easier global access

• Fewer intermediaries

But in the real world, benefits only matter if the system is trusted.

And trust, in finance, is built on one thing more than anything else:

clear rules.

Before we talk about risks or opportunities, it helps to understand why boards care so deeply about those rules.

Why boards do not rush into new technology without regulatory clarity

Board members are not professional technology testers. Their job is to protect the company, its shareholders, its customers, and in many cases, the public trust.

When a board approves something new, it is not just approving a tool. It is approving risk.

If something goes wrong with a marketing campaign, the impact is limited. If something goes wrong with a new financial structure, the impact can be legal, financial, and reputational for years.

That is why boards usually ask boring but important questions before approving any new system. They want to know which law applies. They want to know which regulator is in charge. They want to know who is responsible if there is fraud, a system failure, or a dispute with investors.

With RWA tokenisation, these answers are still not fully clear in India.

A tokenised bond might look like a security, but it does not always fit neatly into existing securities law. A tokenised property might look like ownership, but courts still rely on land records, not blockchains. A token trading platform might look like an exchange, but it may not fall under existing exchange regulations.

From a board’s point of view, this uncertainty is uncomfortable.

No director wants to sit in a hearing three years later explaining why the company used a structure that regulators had not clearly approved at the time. No audit committee wants to explain to shareholders that a legal grey area turned into a real financial loss.

So when boards hesitate, it is not because they dislike innovation.

It is because innovation without clear rules is not progress. It is exposure.

And this is where the real conversation about tokenisation in India begins.

Not with technology, but with regulation.

The first big question: what is a token, legally speaking?

This is where things start to get serious.

When a company issues shares, everyone knows what those shares are. They are securities. They fall under SEBI rules. The disclosure format is known. The reporting requirements are known. The penalties are known.

The same clarity exists for bonds, mutual fund units, deposits, and insurance policies.

Tokenised assets do not yet enjoy that luxury.

From a business point of view, a token might look simple. It represents a bond, or a piece of property, or a loan. But from a legal point of view, the token itself is a new instrument.

And Indian law likes clear categories.

Is the token a security? Is it a unit in a fund? Is it a derivative? Is it a digital record of ownership? Or is it something entirely new?

Each answer leads to a different regulator, a different compliance burden, and a different risk profile.

If the token is treated as a security, SEBI rules apply. That means prospectuses, investor protections, trading rules, insider trading laws, and reporting obligations.

If it is treated as a deposit-like product, the RBI gets involved. That brings capital requirements, liquidity rules, and banking supervision.

If it is treated as a “virtual digital asset,” tax laws and crypto-style reporting requirements may apply.

For a board, this difference is not academic. It directly affects cost, timelines, legal exposure, and even whether a project is commercially viable.

Right now, many tokenisation proposals fall into more than one category at the same time. That makes legal teams uncomfortable and compliance officers nervous.

Most boards are not willing to approve a structure where the company might later hear, “You should have taken approval from a different regulator.”

Before tokenisation can move from pilot projects to serious balance-sheet decisions, regulators need to clearly answer one basic question.

What is a tokenised real-world asset in the eyes of Indian law?

Until that is settled, everything else rests on shaky ground.

Do token holders actually own the asset, or just a digital promise?

Why this single detail can make or break the entire business model

This question sounds simple, but it makes lawyers pause.

When someone buys a token linked to a building, a bond, or a pool of loans, what do they really own?

Do they own a legal piece of the asset itself? Or do they only own a claim against the company that issued the token?

On paper, both can look similar. In real life, the difference is massive.

If a token represents direct ownership, then the holder should have rights even if the issuing company goes bankrupt. Their claim should survive. Courts should recognise it. Creditors should not be able to touch it.

If the token is only a contractual promise, then the holder stands in line with other creditors if something goes wrong. In that case, the “asset-backed” label becomes more marketing than reality.

This matters even more in India because ownership systems are still very traditional.

Land ownership depends on state land records. Securities ownership depends on depositories. Court judgments depend on written contracts and statutory registers, not blockchain entries.

So if a dispute happens, judges will ask very basic questions. Who is the legal owner according to Indian law? Where is that ownership recorded? Which document proves it?

If the only proof is a token on a digital ledger, the answer is not yet obvious.

Boards think about these scenarios early because they know how messy things become during insolvency or fraud investigations. They know that investors will not accept technical explanations when money is at stake.

From their point of view, tokenisation only becomes viable when regulators clearly state how ownership works, how it is protected, and how it is enforced in court.

Without that clarity, every token looks less like ownership and more like a sophisticated IOU.

And boards are not in the business of selling uncertainty as innovation.

Which real-world assets should even be allowed to be tokenised?

Because not everything works well when broken into digital pieces

In theory, almost any asset can be turned into a token. In practice, some assets fit this model much better than others.

Financial assets like bonds, treasury bills, or fund units are already digital in nature. Their ownership is recorded electronically, their cash flows are predictable, and their legal structure is well understood. Tokenising them is more like upgrading the plumbing of the system than rebuilding the house itself.

Physical assets are more complicated. Real estate comes with state-level land laws, zoning rules, stamp duty, and registration requirements. Gold comes with storage, purity checks, and insurance issues. Invoices and loans depend on whether borrowers pay on time and whether the claim can legally be transferred to someone else.

When these assets are split into thousands of small tokens, new questions appear very quickly. How do you value a tiny fraction of an illiquid building? Who takes decisions about maintenance or renovation? Who pays property tax? What happens if the asset is damaged, disputed, or seized by authorities? And can small investors realistically understand all these risks before buying in?

These are not technology problems. They are policy problems.

At some point, regulators will need to clearly define which asset classes are suitable for tokenisation, which should be limited to institutional investors, and which should probably stay off token platforms altogether.

Boards pay close attention to this because asset choice directly affects reputation. Tokenising a government bond is unlikely to cause controversy. Tokenising a half-constructed commercial property and selling small pieces to retail investors is a very different situation.

Without clear rules on eligible assets and investor categories, companies risk launching products that later get criticised, restricted, or even shut down. Most boards would rather wait than become known as the company that tokenised the wrong asset first.

Who is allowed to issue, trade, and hold these tokens?

The invisible system that decides whether tokenisation feels safe or risky

Behind every financial product, there is an entire ecosystem doing quiet but critical work.

Shares have stock exchanges, brokers, registrars, and depositories. Mutual funds have asset managers, custodians, trustees, and distributors. Bonds have clearing corporations and settlement systems.

Tokenised assets will also need a similar structure. The only difference is that today, this structure is still blurry in India.

If a company wants to tokenise an asset, who is legally allowed to issue those tokens? Can any startup do it, or only regulated institutions like banks and asset managers? If investors want to buy and sell these tokens, where does that happen? On a crypto exchange? On a stock exchange? On a new kind of platform altogether?

Then comes custody, which is one of the most sensitive topics in finance.

Who holds the tokens on behalf of investors? Is it a bank? A depository? A technology company? What happens if that custodian is hacked, shuts down, or loses access to its systems? In traditional markets, there are clear rules for this. In tokenised markets, those rules are still being written.

There are also less visible but equally important players. Someone has to verify that the real-world asset actually exists. Someone has to update the system if the asset is sold, damaged, or refinanced. Someone has to audit the smart contracts that control how tokens move. Someone has to manage disputes when transactions go wrong.

Each of these roles carries responsibility. Each one creates risk if poorly regulated.

From a board’s perspective, this matters as much as the asset itself. A good asset wrapped in a weak system is still a weak product.

Directors want to know where accountability sits. If something breaks, who is legally responsible? The issuer? The platform? The custodian? The technology provider? Or the company that promoted the product?

Without a clear regulatory map of who can do what, and under which licence, tokenisation feels less like a modern financial upgrade and more like a patchwork experiment.

Most boards are comfortable taking business risk. They are far less comfortable taking regulatory risk created by unclear market infrastructure.

Until regulators clearly define the roles, responsibilities, and licensing requirements for each participant in the tokenisation chain, many companies will prefer to watch from the sidelines rather than build on uncertain foundations.

What money is used to settle tokenised trades, and why the RBI matters so much

Because assets are only half the story, money completes the transaction

Every trade has two sides.

One side is the asset. The other side is the money.

You can build the most elegant tokenised bond or property structure in the world, but if the payment side is unclear or risky, the entire system becomes fragile.

In traditional markets, this part is boring but reliable. Payments move through banks. Settlement happens through clearing corporations. Everyone knows when money is final and irreversible.

Tokenised markets change this flow.

If tokens move on a blockchain, what form does the money take? Does the buyer send normal bank money through NEFT or RTGS? Does the platform use a special digital version of bank deposits? Does it rely on stablecoins? Or does it use a central bank digital currency?

Each option has very different risk implications.

Using normal bank transfers is safe, but slow and hard to synchronise with instant token transfers. Using stablecoins is fast, but regulators worry about their backing, governance, and failure risk. Using tokenised bank deposits or a wholesale digital rupee is cleaner from a regulatory point of view, but still new and limited in availability.

This is where the Reserve Bank of India becomes central to the story.

The RBI controls what qualifies as money in the financial system. It decides what banks can issue, how settlement happens, and what is considered final payment.

That is why the RBI has been running pilots on wholesale digital currency and tokenised deposits. The message is cautious but clear. Tokenisation is acceptable only if the money side remains safe, traceable, and under regulatory control.

Boards watch this closely.

They understand that asset tokenisation without reliable settlement money is like building a highway without clear traffic rules. Accidents become inevitable.

They also know that if the RBI does not explicitly support a particular settlement method, the regulatory risk becomes too high to justify.

Until there is a widely accepted, regulator-approved way to move money alongside tokenised assets, most large companies will limit themselves to small pilots or controlled environments.

For full-scale adoption, boards need confidence not only in the asset, but also in the rupee that pays for it.

India’s direction so far: cautious steps by RBI and IFSCA

India is not ignoring tokenisation. It is just approaching it the Indian way: slowly, carefully, and inside controlled boundaries.

On the monetary side, the Reserve Bank of India has made its position fairly clear. It is open to using blockchain-style systems for settlement, but it does not want to lose control over what counts as money. That is why most experiments are happening around wholesale digital currency and tokenised bank deposits, not private stablecoins.

From the RBI’s point of view, the asset side can innovate, but the money side must remain safe, regulated, and boring. For boards, this is reassuring. It signals that tokenisation will not turn into a free-for-all payment system.

On the market side, the International Financial Services Centres Authority, or IFSCA, has gone a step further. It has openly discussed how real-world asset tokenisation could work inside GIFT City. It has published consultation papers, invited industry feedback, and explored how tokenised assets might fit into existing financial structures.

This is not accidental.

Regulators often prefer to test new ideas in smaller, controlled environments before allowing them into the wider economy. GIFT City plays that role for India. It acts like a laboratory where new financial models can be observed, adjusted, and regulated without creating risk for the entire domestic market.

For boards, this sends an important signal. Tokenisation is not banned. It is not ignored. But it is being shaped inside a narrow regulatory corridor.

In other words, India is not asking, “Should tokenisation exist?”

It is asking, “How do we make sure it does not break anything important while it grows?”

What boards should do now (even while the rules are still forming)

Waiting for regulation does not mean doing nothing.

Smart boards use this time to prepare quietly.

The first step is education. Directors do not need to understand blockchain code, but they do need to understand how tokenisation changes ownership, settlement, custody, and risk. A short internal briefing from legal and compliance teams goes a long way.

The second step is asset mapping. Not every asset on a company’s balance sheet is suitable for tokenisation. Boards should ask simple questions. Is this asset legally transferable? Is its value easy to measure? Would small investors understand it? Would regulators be comfortable with it?

The third step is legal structuring. Even before regulators finalise rules, companies can explore structures involving trusts, SPVs, and custodians that protect investors and separate assets from company risk. These are not new ideas. They already exist in securitisation and fund management.

The fourth step is regulatory engagement. Many Indian regulators welcome early dialogue. Companies that participate in consultations or pilot programmes often help shape the rules instead of struggling to adapt to them later.

Finally, boards should treat tokenisation as infrastructure, not marketing.

If the main reason for a project is to sound innovative, it will probably fail. If the reason is to reduce settlement risk, improve liquidity, or expand investor access in a compliant way, it has a better chance of surviving long-term.

The goal is not to be first.

The goal is to be correct.

A realistic conclusion: tokenisation will come to India, but quietly

Tokenisation is not a revolution that will arrive overnight.

It is more like an upgrade to the financial plumbing.

The technology already works. Global institutions are experimenting. Large asset managers are building systems. Banks are testing settlement models. None of this is science fiction anymore.

But in India, the pace will be deliberate.

Boards will wait for clear answers on legal status. They will wait for ownership rules that courts respect. They will wait for tax treatment that does not destroy business models. They will wait for compliance frameworks that do not resemble crypto chaos.

This is not hesitation. It is maturity.

When tokenisation finally becomes mainstream in India, it will not be because a startup made noise. It will be because regulators made the rules boring enough for boards to feel safe.

And in finance, boring is usually a compliment.

Quick questions boards and executives are already asking (AEO section)

Is RWA tokenisation legal in India today? It is not illegal, but it is not fully defined either. Small pilots exist, mainly in controlled environments like GIFT City and RBI-supervised projects.

Is tokenisation the same as cryptocurrency? No. Cryptocurrencies usually do not represent real assets. RWA tokens represent ownership or claims over real assets like bonds or property.

Which regulator controls tokenised assets in India? It depends on how the token is classified. It could involve SEBI, RBI, IFSCA, or tax authorities. This is one of the main reasons boards are cautious.

Can retail investors buy tokenised assets? There is no clear nationwide framework yet. Regulators are likely to restrict many products to institutional or high-net-worth investors initially.

Will tokenised assets face crypto-style taxation? That is still unclear and is a major concern for companies. Future clarification will heavily influence adoption.

Should Indian companies start tokenising assets now? Only in pilot form, with strong legal advice and regulatory engagement. Full-scale launches should wait for clearer rules.