Presented by PKM Advisory Services LLP for policy discussion and general information.
A policy and regulatory perspective on digital finance, investment innovation and the future of GIFT City | October 2026
1. Introduction: The next frontier of international finance
Financial markets are beginning to explore a different way of recording ownership. Interests in bonds, funds, commodities, receivables and other real-world assets can be represented by digital tokens using distributed ledger technology (DLT).
This process is known as asset tokenisation. If it is implemented well, it could affect how assets are issued and financed, as well as how they change hands and are settled.
For GIFT IFSC, tokenisation presents a potential opportunity. The International Financial Services Centres Authority (IFSCA) already oversees a broad range of international financial activities. A workable framework for tokenised assets could build on that foundation and make the jurisdiction more attractive to fintech businesses, funds, digital securities platforms, institutional investors and technology providers.
The central policy question is whether GIFT IFSC can move beyond recognising the technology’s potential and provide rules that give businesses enough legal certainty to use it at scale.
IFSCA took a significant step on 26 February 2025, when it published its Consultation Paper on Regulatory Approach towards Tokenization of Real-World Assets. The paper looks at tokenising financial securities such as funds, bonds and stocks. It also covers other financial products and assets: payments, deposits, bills receivable, precious metal bullion, commodities, intellectual property and commercial real estate.
The next step is to translate that policy direction into practical rules—rules that clarify legal rights, protect investors and can support cross-border business.
2. What exactly is tokenisation?
In simple terms, tokenisation creates a digital token to represent an asset or a particular set of rights connected with it.
Take a company that issues a USD 10 million bond. Normally, ownership and transfers are recorded through established securities infrastructure. With tokenisation, the bond (or an interest in it) can be represented by digital tokens on a controlled blockchain network.
The legal documents must make clear what the token represents. It could itself constitute a security, record an enforceable claim maintained in another system, or serve only as a digital record of an interest in an asset.
This is an important distinction: issuing a token does not, on its own, establish ownership of the asset behind it.
Where could it be used?
- Financial securities: bonds, shares and interests in investment funds.
- Funds: units or interests in eligible investment funds, represented digitally.
- Bullion and commodities: digital claims supported by identifiable gold, silver or other assets.
- Trade finance: invoices, receivables, warehouse receipts and other eligible trade documents.
- Real estate: interests held through legally recognised securities or investment vehicles.
- Deposits and settlement: tokenised bank liabilities and other regulated forms of digital money.
Tokenisation shouldn’t be confused with cryptocurrencies like Bitcoin. A token that represents a regulated bond, or a claim over allocated gold, rests on a very different legal and economic footing from an unbacked cryptoasset. IFSCA’s consultation paper draws the same line. It is limited to tokenising real-world assets, and IFSCA has said it does not intend to regulate, permit trading in or endorse cryptocurrencies or crypto assets.
3. Why tokenisation matters to the financial spectrum
Tokenisation should not be viewed solely as a technology trial. In suitable circumstances, it may improve several core market functions.
- First, fractional ownership. An eligible asset can be broken into smaller investment interests, which may widen access to investments that would otherwise need a lot of capital. Investor eligibility and minimum investment requirements still apply.
- Second, settlement efficiency. Shared ledgers and smart contracts can cut manual reconciliation, shorten settlement cycles and automate some payment obligations.
- Third, liquidity and distribution. Where compliant trading infrastructure exists, tokenisation can support wider distribution and secondary transfers of eligible assets.
- Fourth, collateral management. Tokenised assets could make it quicker to verify, transfer and reuse eligible collateral, subject to enforceable security interests and limits on rehypothecation.
- Fifth, transparency and auditability. A well-designed system leaves a traceable record of transactions and makes ownership transfers easier to see.
- Sixth, international market connectivity. Investors, custodians, asset managers and settlement systems in different jurisdictions could interact more efficiently.
These benefits are not guaranteed. Disconnected platforms, uncertain legal rights, limited liquidity, cyber threats and incompatible systems could reduce—or even outweigh—the expected gains.
4. Where does the IFSCA regulatory gap arise?
IFSCA’s February 2025 consultation paper matters because it openly accepts that the regulatory treatment of real-world asset tokenisation needs to be examined. It looks at the definition and characteristics of digital tokens, rights and ownership, issuance, custody, trading, clearing and settlement, and risk management. It also hints that IFSCA is considering different treatment for DLT-based market infrastructure, under the principle of “same risk, same regulation”.
A consultation paper signals a policy direction; it does not create binding rules. IFSCA’s 2025 paper seeks views on key questions rather than setting out a final regime. On the official material reviewed for this article, it remains the principal dedicated policy document on tokenisation. As of October 2026, a standalone regulation covering the full lifecycle of tokenised assets had not been notified.
IFSCA does have some related pieces in place. The IFSCA (TechFin and Ancillary Services) Regulations, 2025, notified on 8 July 2025, provide a registration framework for TechFin and ancillary service providers in the IFSC. The IFSCA FinTech Sandbox Framework, issued by circular dated 16 March 2026, offers a route for testing innovative solutions under a Limited Use Authorisation. Neither is a dedicated tokenisation regime. The main policy issues that still need resolving are set out below.
A. Legal recognition of tokenised ownership
Start with a basic question: what does a token actually give its holder? It could be legal title, beneficial ownership or a contractual claim, or it could just be a record of rights held in another register.
Say a gold token passes to a new investor. Does the investor get title to allocated gold, an undivided beneficial interest, a claim against the issuer or a contractual right to redeem?
The same questions arise for tokenised bonds, fund interests and instruments linked to real estate.
A complete framework should set out the legal structure, the link to the underlying asset, ownership records, redemption rights and the order of priority between claims.
B. Issuance and disclosure requirements
Putting a security on a blockchain shouldn’t take it outside the investor-protection principles that already apply.
The rules should say when an issuance counts as a security or another regulated financial product, which offering documents are needed, who is allowed to invest, and what restrictions apply to private placements and public offerings.
Disclosure should cover the underlying asset, the issuer, valuation, encumbrances, the rights attached to the token, technology risks, transfer restrictions, redemption conditions and conflicts of interest.
C. Custody and safeguarding
Digital tokens come with operational risks that traditional securities custody doesn’t usually face.
Examples are lost private keys, unauthorised transfers, cyberattacks, compromised smart contracts and the insolvency of the technology or custody provider.
The framework should treat custody of the token and custody of the underlying asset as separate things. Where relevant, it should also call for segregation of client assets, independent verification, strong key management, recovery procedures and periodic audits.
D. Trading, clearing and settlement
If tokens can’t be traded in a legally secure and commercially workable secondary market, adoption will probably stay limited.
IFSCA needs to spell out the authorisation requirements for trading platforms, intermediaries, market makers, custodians and settlement providers.
The rules should deal with settlement finality, failed transactions, erroneous transfers, market manipulation, investor eligibility and the circumstances in which a transaction can be reversed or challenged.
E. Insolvency and enforceability
What happens if the issuer, custodian, platform operator or the entity that owns the asset becomes insolvent? That is the fundamental question.
Token holders need to know whether their assets are kept separate from the issuer’s estate, whether their rights survive insolvency and how competing claims will be settled.
Answering that takes coordination between financial regulation, contract law, property law and insolvency law.
F. Cross-border transfers and regulatory coordination
GIFT IFSC wants to serve international markets, and tokenised assets can span several of them at once. An issuer might be in one country, an investor in another, a custodian in a third and a trading platform somewhere else.
The framework has to cover applicable law, foreign investor eligibility, restrictions on cross-border transfers, AML/CFT requirements, data governance, tax treatment and whether ownership claims can be enforced across jurisdictions.
These questions go to the heart of the model. Without workable answers, businesses and investors may be reluctant to rely on tokenised assets.
5. International experience: What can GIFT IFSC learn?
Singapore, Hong Kong and Vietnam have approached tokenisation in different ways. For GIFT IFSC, the useful comparison is not just what each jurisdiction has announced, but what its framework has enabled in practice.Singapore — Project Guardian
Institutional experimentation and commercial integrationThe Monetary Authority of Singapore (MAS) runs Project Guardian, a collaborative initiative with the financial industry. It tests tokenisation across asset and wealth management, fixed income and foreign exchange.Participants in the industry trials have included DBS, UBS Group, Franklin Templeton, OCBC, Ant Group and other international financial firms. MAS has published industry frameworks that came out of the trials, among them the Guardian Funds Framework, the Guardian Fixed Income Framework and a paper on using tokenised bank liabilities in transaction banking. The initiative lists interoperability across platforms and jurisdictions as one of its objectives.Lesson for GIFT: pair regulation with institution-led pilots, shared infrastructure standards and a clear path from experiment to commercial rollout.Hong Kong — Tokenised bonds and investment products
Demonstrated issuance and evolving market accessThe Hong Kong Government issued a HK$800 million tokenised green bond in February 2023. A multi-currency digital green bond of about HK$6 billion followed in February 2024, and then a HK$10 billion issuance in November 2025. In October 2026 a fourth issuance of about HK$20 billion was reported, with tokenised deposits used to settle the Hong Kong dollar tranche.On 5 June 2026 the Hong Kong Monetary Authority convened a Tokenised Bond Expert Group to push the adoption of tokenised bonds further. It is also working with the Financial Services and the Treasury Bureau on improvements to the legal and regulatory regime for tokenisation in the fixed income market.On 20 April 2026 Hong Kong’s Securities and Futures Commission (SFC) launched a framework to pilot secondary trading of tokenised, SFC-authorised investment products, starting with open-ended funds on SFC-licensed virtual asset trading platforms. The SFC reported that 13 tokenised products were publicly offered in Hong Kong as of March 2026, and that assets under management in the tokenised classes had reached HK$10.7 billion. It has since approved secondary trading of two tokenised money market funds under the framework.Lesson for GIFT: get the legal foundation right first, show it working through credible issuances, and open up secondary trading step by step, with investor safeguards.Vietnam — A controlled cryptoasset market pilot
A phased licensing model with defined market boundariesVietnam’s Government Resolution No. 05/2025/NQ-CP, effective from 9 September 2025, set up a five-year pilot for its cryptoasset market. It provides for regulated service providers licensed by the Ministry of Finance, and sets requirements on issuance, disclosure, custody, trading, cybersecurity and AML/CFT.One important point: Vietnam’s regime is not a general framework for tokenised securities. Under the pilot, cryptoassets must be backed by real underlying assets and cannot be securities or fiat currency. Only Vietnamese enterprises may issue them, offerings are limited to foreign investors, activity is conducted in Vietnamese dong, and transactions must go through licensed service providers.Lesson for GIFT: a phased, supervised market can bring regulatory clarity. But GIFT should not copy Vietnam’s restrictions without thinking about what an international financial centre is actually trying to achieve.What does the comparison tell us?
| Policy dimension | Singapore | Hong Kong | Vietnam | Recommended direction for GIFT IFSC |
|---|---|---|---|---|
| Primary approach | Collaborative pilots | Regulated issuance and market development | Controlled cryptoasset-market pilot | Risk-based, phased regulation |
| Institutional participation | Extensive financial-sector collaboration | Government and licensed financial institutions | Licensed market-service providers | Banks, FMEs, custodians, exchanges and fintech firms |
| Secondary trading | Tested through institutional initiatives | Explicit framework for selected products | Within the defined pilot framework | Authorised platforms with clear settlement rules |
| Cross-border ambition | High | High | More restricted pilot | International interoperability with safeguards |
6. How should IFSCA close the gap?
IFSCA could address these issues through a modular framework for tokenised real-world assets. A single, coherent structure would help connect individual fintech trials to a regime that businesses can use on a continuing basis.
1. Notify a dedicated tokenisation regulation
IFSCA should consider a standalone regulation that defines:
- Digital tokens and tokenised real-world assets.
- How the token relates legally to the underlying asset.
- Eligible asset classes and issuance structures.
- Authorised issuers, platforms, custodians and service providers.
- Requirements for offering, disclosure, transfer and redemption.
- Governance, technology, risk management and enforcement.
It should also be clear how the new regulation fits with IFSCA’s existing regulations on fund management, capital markets, banking, payment services and other regulated activities.
2. Establish a legal rights and ownership framework
The regulation should recognise different structures instead of forcing one model onto every asset.
A token might represent a security issued by a company, a unit in an eligible fund, a beneficial interest held through a legally recognised arrangement, or a contractual claim over an identified asset.
For each structure, the rules should specify the legal owner, the token holder’s rights, governing law, the transfer mechanism, redemption conditions and priority in insolvency.
Where the assets sit outside the IFSC, the framework also has to deal with the laws that govern title to them. IFSCA authorisation alone cannot override another jurisdiction’s property law.
3. Introduce a proportionate licensing framework
Not every participant should face the same regulatory requirements.
A possible framework could separate:
- Issuers: responsible for asset eligibility, legal documentation and disclosures.
- Tokenisation technology providers: responsible for the integrity of the technology and agreed service standards.
- Custodians: responsible for safekeeping digital tokens and, where relevant, the underlying assets.
- Trading platforms: responsible for market integrity, admission standards and trading controls.
- Settlement providers: responsible for settlement processes, reconciliation and operational resilience.
Entities that are already regulated could be allowed to carry out tokenisation-related activities through an appropriate approval or variation of permission, where the governing regulations allow it.
Capital, governance and technology requirements should follow the risk of the activity, and not how new the technology happens to be.
4. Build on the existing sandbox with a commercial pathway
IFSCA already has a sandbox route. Its FinTech Sandbox Framework of 16 March 2026 provides for a Limited Use Authorisation to test innovative solutions, and it replaced the earlier 2020 sandbox and 2022 FinTech Entity frameworks. A company announcement in October 2026 reported that IFSCA had granted a Limited Use Authorisation under this framework to a maritime-asset tokenisation platform, which suggests the route is already being used for real-world asset tokenisation.
The unresolved issue is the route from testing to ordinary commercial activity. A Limited Use Authorisation and any related relaxations end with the testing stage. Firms therefore need to know what approval they can seek next; otherwise, the sandbox risks becoming a holding stage rather than a route to market.
IFSCA could invite proposals for selected tokenisation use cases, such as tokenised debt instruments, eligible fund interests, and allocated bullion and trade receivables. Each pilot would need defined investor categories, transaction limits where appropriate, custody safeguards, reporting obligations and exit arrangements.
Pilots that succeed should have a transparent route to full authorisation.
5. Permit regulated secondary trading
Whether a tokenised asset has real economic value can depend on whether investors can lawfully transfer or sell it.
IFSCA should state when secondary trading is allowed, which entities can run platforms, how investor eligibility is checked and how settlement finality is achieved.
The framework should also deal with market surveillance, price transparency, liquidity provision, conflicts of interest and the risks of trading outside conventional market hours.
6. Address settlement money and interoperability
Tokenised securities won’t reach their potential if the asset side is digital but the cash side still depends on slow or fragmented processes.
IFSCA should work with eligible banks and settlement institutions to explore delivery-versus-payment arrangements, tokenised deposits and other legally permissible settlement mechanisms.
Interoperability between platforms, common data standards and compatibility with established custody and securities infrastructure should be built into the design from day one.
7. Provide clarity on tax, accounting and reporting
Businesses and investors need to know how tokenised transactions will be treated under the applicable tax and accounting framework.
Guidance should cover how tokenised instruments are classified, transfer and redemption events, valuation, withholding obligations, reporting, and the treatment of cross-border transactions.
Any special tax treatment would need the appropriate legislative or administrative action. It shouldn’t be assumed to follow automatically from IFSCA authorisation.
7. Should GIFT IFSC bring its rules at par with Vietnam?
GIFT IFSC should focus on being competitive internationally rather than reproducing Vietnam’s model.
Vietnam’s five-year pilot is worth studying because it sets clear market boundaries and puts service providers under supervision. But its limits on eligible underlying assets and its foreign-investor-only offerings make it quite different from what an international financial centre is trying to do.
GIFT IFSC has a different opportunity: to host regulated international financial products, cross-border capital flows and institutional investment. Its framework should therefore draw on three models that complement each other:
- From Vietnam: phased implementation, controlled market entry, defined licensing and supervision.
- From Singapore: collaboration among institutions, common technical standards, interoperability and pilots that mean something commercially.
- From Hong Kong: actual tokenised issuances, legally supported ownership and settlement arrangements, and gradual development of secondary markets.
The goal is a framework that is at least as clear, credible and usable in practice as those of competing centres, without reproducing every restriction adopted elsewhere.
8. A proposed implementation roadmap for IFSCA
Phase I (0–6 months): Legal and regulatory groundwork
Complete stakeholder consultations, map the existing regulations, identify gaps in ownership, custody, insolvency, settlement and cross-border enforceability, and publish a proposed regulatory framework.
Phase II (6–12 months): Controlled commercial pilots
Invite eligible financial institutions to pilot tokenised bonds, fund interests, bullion and trade-finance assets. Set licensing conditions, independent asset verification, investor disclosure and technology-risk standards.
Phase III (12–24 months): Market infrastructure and scaling up
Allow approved secondary trading, develop settlement and custody standards, improve interoperability with existing financial infrastructure, and set out a transparent move from pilot status to full authorisation.
This roadmap is a proposal, not a timetable announced by IFSCA. The pace would depend on consultation, any required legal changes, market readiness and the necessary approvals.
9. What could this mean for the business community in GIFT City?
A well-designed framework could open up opportunities for several kinds of business:
- Fund management entities (FMEs): digital distribution and administration of eligible fund interests, subject to fund and investor eligibility requirements.
- Bullion businesses: tokenised claims tied to independently verified, allocated gold or silver, with suitable custody and redemption arrangements.
- Investment banks and securities firms: tokenised debt issuance, placement and distribution, and eligible secondary-market activity.
- Fintech enterprises: compliant tokenisation platforms, smart-contract development, digital identity, cybersecurity and transaction monitoring.
- Custodians and settlement providers: institutional custody of digital assets, reconciliation and delivery-versus-payment infrastructure.
- Trade-finance businesses: digitised receivables and trade documents, subject to the underlying claims being enforceable and to the relevant trade laws.
Professional advisory firms could find work in legal structuring, regulatory applications, tax analysis, asset verification, valuation, governance, accounting and continuing compliance.
Even a well-designed regulatory framework will not guarantee adoption. Businesses will need customers and genuine transaction activity. Tokenisation is more likely to gain traction when it addresses a practical problem in financing, settlement or distribution—not when it simply creates another digital format.
10. Conclusion: The opportunity is to lead, not follow
Tokenisation may become a meaningful part of international financial infrastructure, with possible applications in funds, securities, bullion, trade finance and other eligible real-world assets.
IFSCA has already acknowledged this potential in its February 2025 consultation paper. What is needed now is enough certainty on legal ownership, issuance, custody, settlement, secondary trading, insolvency and cross-border enforceability.
Singapore shows the value of institutions working together. Hong Kong shows why it matters to turn tokenisation into real financial products and market infrastructure. Vietnam shows how a controlled pilot can set clear operating boundaries.
GIFT IFSC should combine these lessons into a framework built for international finance: proportionate regulation, enforceable ownership rights, strong investor safeguards and a clear path from experiment to commercial operation.
The ambition should be a jurisdiction where global institutions can issue, hold, transfer and settle tokenised financial assets with confidence.
Blockchain technology by itself will not determine which financial centre succeeds. The deciding factors are more likely to be clear legal rights, credible supervision, infrastructure that works across platforms and products that meet real commercial needs.
If these elements come together, tokenisation could strengthen GIFT City’s position as a global financial hub and a gateway between Indian capabilities and international capital markets.
Principal references
- IFSCA — Consultation Paper on Regulatory Approach towards Tokenization of Real-World Assets, 26 February 2025.
- IFSCA — (TechFin and Ancillary Services) Regulations, 2025, Notification No. IFSCA/GN/2025/005, 8 July 2025.
- IFSCA — FinTech Sandbox Framework, Circular No. 505/IFSCA-FTec0FTEF/1/2023, 16 March 2026.
- Monetary Authority of Singapore — Project Guardian.
- Hong Kong Monetary Authority — Tokenised Bond Expert Group, 5 June 2026.
- Hong Kong Securities and Futures Commission — Framework for secondary trading of tokenised investment products, 20 April 2026.
- Hong Kong Government digital green bond issuances — ESG Today, 6 October 2026.
- Government of Vietnam — Resolution No. 05/2025/NQ-CP, 9 September 2025.
Disclaimer: This article is meant for policy discussion and general information. It is not legal, investment or tax advice. Whether any tokenisation structure is workable must be assessed against the laws and regulations in force at the relevant time, in every jurisdiction involved. Regulatory positions are stated as at October 2026 and should be verified before anyone relies on them.