India's Asset Tokenisation Bill, 2026:A Landmark Proposal, a Fractured Legal Foundation, and a Long Road to Passage

The Bill and Its Author

On 14 March 2026, Rajya Sabha MP Raghav Chadha introduced the Private Member’s Bill on Asset Tokenisation (Regulation) Bill, 2026 — India's first dedicated legislative proposal to govern blockchain-based real-world asset (RWA) tokenisation. Chadha, an AAP member and the youngest in the Upper House, had been building toward this for months. He first called for a bespoke tokenisation statute in December 2025, citing capital flight, land title chaos, and the democratic case for fractional asset ownership. The Bill formalises that advocacy into a 27-section, 11-chapter draft statute.

Its scope is substantial. The Bill covers the full lifecycle of tokenised assets: issuance conditions, offering document requirements, custody norms, platform registration, settlement obligations, investor protection mechanisms, and a penalty regime extending to ten years' imprisonment and fines of Rs. 25 crore or three times the gain, whichever is higher. Appeals lie to the Securities Appellate Tribunal — a credible, well-established forum. The statute is technology-neutral by design, drawing definitional coherence from the IT Act 2000, the Securities Contracts (Regulation) Act 1956, and the RBI Act 1934.

What the Bill Actually Does – Legal Recognition of Asset Tokenisation

The Bill's most significant contribution is legal recognition. Section 3 provides that asset tokens issued in accordance with the statute are valid digital representations of rights or interests in underlying assets. Critically, token issuance does not, by itself, constitute a transfer of ownership of the underlying asset — unless the tokenisation arrangement expressly so provides. That single clarification resolves one of the most persistent legal ambiguities in Indian tokenisation practice.

The definition of 'asset' is deliberately broad: real estate, commodities, securities, receivables, infrastructure assets, carbon credits, and intellectual property rights — with residual power in the Central Government to notify additional classes. 'Asset tokens' are cryptographically secured digital representations recorded on a distributed ledger or equivalent technology. The Bill does not create a new regulator. It designates existing sector authorities — SEBI for securities, RBI for payment-linked tokens, and IRDAI or PFRDA for sector-specific assets — as governing bodies, with an Inter-Regulatory Coordination Committee under Section 8 to manage jurisdictional overlaps.

The regulator-led approach is pragmatic but not without risk. Where SEBI and RBI jurisdictions overlap — as they will on payment-linked security tokens — the Bill provides no default tiebreaker. The Committee's role and composition are left almost entirely to delegated legislation. This is an area that will need sharpening before the statute can operate cleanly.

India's Existing Digital Asset Law: VDAs and the FIU Regime

To understand where Chadha's Bill fits, one must first map what already exists. India's current legal architecture for digital assets is not a regulatory vacuum — it is something more complicated: a patchwork of fiscal and anti-money-laundering rules that tax and monitor digital assets without formally recognising or regulating them.

The Finance Act 2022 introduced Section 2(47A) of the Income Tax Act , defining Virtual Digital Assets broadly as any information, code, number or token — generated through cryptographic means or otherwise — that provides a digital representation of value, is exchangeable with or without consideration, and can be transferred, stored, or traded electronically. NFTs and government-notified digital assets are included. CBDCs are excluded. Notably, the definition does not reference distributed ledger technology or blockchain — its anchor is cryptography, not the underlying infrastructure.

The tax consequences are steep. Section 115BBH imposes a flat 30% tax on gains from VDA transfers — no slab benefit, no deductions beyond cost of acquisition, no loss set-off against any other income, and no carry-forward. Section 194S mandates 1% TDS on transfers above Rs. 50,000 (or Rs. 10,000 in specified cases). The regime applies equally to residents and non-residents transacting on Indian platforms.

On the AML/CFT side, the Ministry of Finance notification of 7 March 2023 brought VDA Service Providers within the Prevention of Money Laundering Act 2002 as reporting entities. The FIU-IND issued its AML & CFT Guidelines on 10 March 2023, mandating KYC, client due diligence, Travel Rule compliance, suspicious transaction reporting, and — critically — mandatory registration with FIU-IND as a precondition of lawful operation. The obligation is activity-based, not presence-based: offshore platforms serving Indian users are equally caught. FIU-IND enforced this aggressively. In December 2023, it issued show-cause notices to nine major offshore exchanges — including Binance, KuCoin, Kraken, and Bitfinex — for non-compliance, and directed MeitY to block their URLs and app store listings.

India's digital asset law, in its current form, is enforcement-first and recognition-second. The state taxes VDA gains at rates comparable to luxury goods, mandates AML compliance as a market entry requirement, and has actively blocked non-compliant platforms — all without a foundational statute that says what a digital asset actually is under Indian law, what rights attach to its ownership, or what legal recourse a holder has against an issuer or platform.

The Definitional Fault Line: VDA vs. Asset Token

The juxtaposition between the Tokenisation Bill and the existing VDA regime reveals a structural inconsistency that Parliament will need to resolve.

The Income Tax Act's definition of VDA is intentionally wide. It covers any cryptographically generated token that represents value and can be traded. An 'asset token' under the Tokenisation Bill — a cryptographically secured digital representation of rights in an underlying real-world asset — would almost certainly fall within that definition. This creates an immediate problem: a tokenised real estate interest, regulated and recognised under the Tokenisation Bill as a legitimate investment instrument, may simultaneously be taxed as a VDA at 30% flat with no deduction for expenses and no ability to offset losses.

The FIU registration obligation compounds this. If an issuer or platform operating under the Tokenisation Bill's framework provides exchange, transfer, or custody services in relation to asset tokens — and they will — they are also VDA Service Providers under the PMLA. They must register with FIU-IND, comply with AML-CFT Guidelines, and file suspicious transaction reports, in addition to whatever obligations the Tokenisation Bill's regulatory authority prescribes. There is no harmonisation provision in the Bill.

Legal Layer	Instrument	What It Does	Gap It Creates
Definition	Sectio 2(47A) IT Act	Defines VDAs for tax purposes — broad, cryptography-anchored	No ownership rights, no issuer obligations
Taxation	Section 115BBH IT Act	30% flat tax on VDA transfer gains, no deductions, no loss set-off	Disincentivises legitimate RWA investment
AML/CFT	PMLA Notification (Mar 2023) + FIU-IND Guidelines	VDA SPs as reporting entities; FIU-IND registration mandatory	Overlaps with Tokenisation Bill's own registration regime
Recognition	Asset Tokenisation Bill, 2026	Legal recognition of asset tokens; regulated issuance, trading, custody	Pending — Private Member's Bill, not yet law

Global Comparison

India is a late mover in RWA tokenisation regulation, and the gap is widening. The EU's MiCA Regulation entered full force in December 2024 — covering issuance, trading, and custody of crypto-assets through a single, pass portable framework across 27 member states, with over 53 Crypto-Asset Service Provider (“CASP”) licences granted. Dubai's VARA updated its Rulebook in May 2025 to formally legalise the issuance, listing, and secondary trading of tokenised Real-World Assets (“RWAs”), classified as Asset-Referenced Virtual Assets, with mandatory monthly audits and capital requirements. Singapore's MAS has operated a stablecoin framework since 2023 and has finalised its Digital Token Service Provider licensing rules. Tokenised RWA assets under management globally exceeded USD 33 billion in 2025, excluding stablecoins.

Jurisdiction	Framework	RWA Tokenisation Status
EU	MiCA Regulation (fully in force Dec 2024)	Regulated; passportable; CASP licensing active
UAE / Dubai	VARA Rulebook (updated May 2025)	Full legislation; secondary trading permitted; ARVAs defined
Singapore	MAS / PSA + DTSP licensing	Operational; stablecoin framework since 2023
USA	SEC integration; no single federal statute	Fragmented; evolving; state-by-state variation
India	VDA tax + PMLA/FIU (enforcement only); Tokenisation Bill (proposed)	Taxation and AML compliance without legal recognition

India's position is unusual: it has one of the world's most aggressive VDA tax regimes and a functioning AML enforcement apparatus, but no statute that tells an RWA token holder what they actually own. The Tokenisation Bill would fix the recognition gap. But without corresponding amendments to the VDA tax provisions and a harmonised compliance pathway between the Tokenisation Bill's regulatory framework and the PMLA/FIU regime, it creates a three-layer compliance stack that will deter precisely the institutional participation the Bill is designed to attract.

Will This Bill Become Law?

The honest answer is: not in its current form, and probably not soon. Since Independence, only 14 Private Member's Bills have become law — the last to pass both Houses was in 1970. In the 17th Lok Sabha, 729 PMBs were introduced in the Lok Sabha and 705 in the Rajya Sabha; barely a fraction received any discussion. Chadha's Bill is an opposition initiative, introduced into a House where government business dominates the legislative schedule. Private Member's Bills get two and a half hours on alternate Fridays — insufficient for a statute of this technical complexity.

That said, the trajectory of Indian financial legislation suggests the Bill may achieve its most important objective without passing. The Transgender Persons (Protection of Rights) Act 2019 originated as a private member's bill passed by the Rajya Sabha in 2015. The government ultimately legislated on its own terms — but the private bill created the pressure, the vocabulary, and the public record that made government action necessary. Chadha's tokenisation initiative is playing a similar role: it has shifted the conversation from policy suggestion to legislative proposal, and the drafting quality is sufficient to function as a government template.

The Bill's real impact may be felt before it is ever voted on. India's crypto tax regime has already pushed over 70% of trading volume offshore. A credible legislative proposal — widely reported, technically grounded, and politically visible — raises the cost of continued inaction. Governments respond to that arithmetic.

What Needs Strengthening

Several provisions require refinement for the Bill to be operationally sound. First, the inter-regulatory coordination mechanism needs a default rule — the Committee under Section 8 must have a tiebreaker or decision timeline where SEBI and RBI jurisdictions conflict. Second, the Bill is silent on cross-border tokenisation, FEMA implications for foreign issuers, and offshore platform obligations — a critical omission for any framework meant to attract global capital. Third, DeFi protocols and NFTs are entirely unaddressed. MiCA explicitly carves out fully decentralised protocols; India's Bill leaves the question open.

Most significantly, the Bill must interface with the VDA tax regime and the FIU registration framework. Without a Section 115BBH carve-out or preferential treatment for regulated asset tokens, the fiscal burden on legitimate RWA investment remains unchanged. And without a harmonisation provision that counts Tokenisation Bill registration as satisfying PMLA reporting entity requirements — or vice versa — regulated issuers will face duplicative compliance obligations. These are not minor drafting oversights. They are structural gaps that will limit market uptake even if the Bill passes.

Conclusion

India's digital asset legal architecture is currently defined by fiscal aggression and AML vigilance — but not legal recognition. The VDA tax regime taxes what it cannot define as property. The FIU regime monitors what it cannot regulate as a market. The Tokenisation Bill, if enacted with the necessary cross-statute amendments, would close that circle. It would give asset tokens a legal identity, give token holders enforceable rights, and give institutional participants a regulatory home.

Disclaimer

The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.

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Ms. Kritika Krishnamurthy

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AK & Partners

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