The introduction of the Asset Tokenisation (Regulation) Bill, 2026, in the Rajya Sabha on March 13, 2026, marks a fundamental shift in the legislative approach to digital finance in India. Introduced as a Private Member’s Bill by Member of Parliament Raghav Chadha, this legislative proposal addresses a profound regulatory void that has historically hindered the development of a structured digital asset economy.
Before this legislative effort, the legal status of tokenized real-world assets remained ambiguous, governed only by a patchwork of tax mandates and anti-money laundering reporting requirements under the Prevention of Money Laundering Act, 2002. The 2026 Bill provides the first formal legislative structure designed to bridge the gap between traditional property law and distributed ledger technology, effectively aiming to create a “UPI moment” for asset ownership in the country.
The necessity of this framework is underscored by the significant migration of capital and innovation away from the domestic economy. Data indicates that unclear regulations have pushed nearly 73% of virtual digital asset trading to foreign exchanges, while over 180 Indian startups in the sector have relocated to jurisdictions with clearer legal definitions, such as Singapore and the United Arab Emirates.
By establishing a clear legal and regulatory environment, the Bill seeks to reverse this brain drain, protect approximately 12 crore investors using offshore platforms, and reclaim lost tax revenue. The proposed legislation focuses on the conversion of rights in tangible and intangible assets into digital tokens, promising to democratize investment opportunities and bring transparency to sectors plagued by opaque record-keeping systems.
Legal Recognition and the Decoupling Principle
One of the most significant legal contributions of the Bill is Chapter II, which provides formal legal recognition for asset tokenization. Section 3(1) contains a non-obstante clause, stating that notwithstanding anything contained in any other law for the time being in force, asset tokens issued in accordance with the Act shall be recognized as valid digital representations of rights in the underlying asset. This is a powerful provision designed to prevent traditional statutes from invalidating digital ownership solely on the basis of its electronic form.
However, the Bill introduces a crucial “decoupling principle” in Section 3(2), which states that the issuance of an asset token shall not, by itself, constitute a transfer of ownership of the underlying asset unless expressly provided in the tokenisation arrangement. This distinction is vital for maintaining harmony with the Transfer of Property Act, 1882, and The Registration Act, 1908. By decoupling the token from the legal title, the Bill allows for “economic tokenization” where investors gain rights to rental yields or revenue streams without triggering the complex and often expensive processes associated with transferring physical property deeds.
The enforceability of these rights is guaranteed under Section 4, which ensures that token holders can legally enforce their entitlements against the issuer and other relevant persons. This enforceability is tied to the contractual terms and disclosures made at the time of issuance, creating a duty of care for issuers that is comparable to the obligations of companies issuing shares or bonds under the Companies Act, 2013.
The Multi-Regulator Oversight Model and Sectoral Jurisdiction
Rather than creating a new, monolithic regulator, the Asset Tokenisation (Regulation) Bill, 2026, adopts a decentralized oversight model. Section 5 empowers the Central Government to designate existing financial sector regulators as the authorities responsible for the purposes of the Act. This approach acknowledges that tokenisation is an infrastructure technology that can be applied across diverse financial segments.
The Bill defines jurisdictional boundaries based on the nature of the underlying asset in Section 7. The Securities and Exchange Board of India (SEBI) is designated as the principal authority where the tokenized assets involve securities. Conversely, the Reserve Bank of India (RBI) exercises oversight where tokens relate to payment systems, stable value arrangements, or banking activities. Sector-specific regulators, such as the Insurance Regulatory and Development Authority of India (IRDAI) or the Pension Fund Regulatory and Development Authority (PFRDA), are granted jurisdiction over tokens in their respective domains.
To address the potential for regulatory overlap or jurisdictional gaps, Section 8 provides for the constitution of an Inter-regulatory Coordination Committee. This committee, consisting of a Chairperson and Members appointed by the Central Government, is tasked with ensuring a unified regulatory approach and facilitating consultation among different authorities. This mechanism is essential for handling hybrid tokens that may exhibit characteristics of both a security and a payment instrument.
The powers of the regulatory authority under Section 6 are comprehensive. They include the power to grant, renew, suspend, or cancel the registration of issuers, custodians, and trading platforms. The authorities are also empowered to specify eligibility conditions, disclosure standards, and prudential norms, ensuring that the market operates with high standards of conduct and financial stability. Furthermore, the regulators have the authority to call for information, conduct inspections, and issue directions to ensure the orderly development of the asset-token market.
Standards for Issuance and the Role of Disclosures
Chapter V of the Bill establishes the protocols for the issuance of tokens, focusing on asset verification and investor transparency. Section 9 mandates that no issuer shall offer asset tokens unless they possess legal ownership, control, or enforceable rights over the underlying asset. This prevents the issuance of tokens against non-existent or contested assets, a practice that has caused significant losses in unregulated digital markets.
The underlying asset must be appropriately valued and verified as per the prescribed standards. This valuation requirement is particularly critical for assets like real estate, infrastructure, or fine art, where price discovery is often complex. The Bill also requires that every issuance must comply with anti-money laundering (AML) and know-your-customer (KYC) requirements, integrating the tokenised ecosystem with the global financial compliance network.
Section 10 introduces the requirement for an “offering document.” Similar to a prospectus in the equity markets, this document must contain full, true, and fair disclosures regarding the nature of the asset, the associated risks, and the specific rights attached to the token. The regulatory authority is authorized to specify the exact particulars of this document, ensuring that retail investors have access to the information necessary for informed decision-making.
Trading Infrastructure and Custodial Safeguards
The Bill recognizes that liquidity is a primary benefit of tokenisation and establishes a regulated structure for secondary markets in Chapter VI. Section 11 stipulates that asset tokens must be traded only on platforms registered with the regulatory authority. These platforms are expected to operate under conditions that ensure fair pricing, transparent execution, and market surveillance, mirroring the regulatory standards of traditional stock exchanges.
One of the more conservative and protective measures in the Bill is found in Section 12, which mandates the use of registered custodians. Both the underlying assets and the corresponding digital tokens must be held with a custodian registered under the Act. This requirement shifts the ecosystem away from the self-custody models typical of decentralized finance and toward a traditional, intermediary-led model.
The custodian’s duties under Section 12(2) include the strict segregation of client assets, the maintenance of proper records, and the implementation of robust technological and operational safeguards. This structure is designed to build institutional trust, ensuring that the tokens remain a valid claim even if the issuer or trading platform faces insolvency. Section 13 reinforces this by requiring that all transactions be recorded and settled in a manner that ensures transparency and auditability, leveraging the inherent features of blockchain technology.
Investor Protection and Risk Management Frameworks
Chapter VII focuses on the resilience of the market and the safety of investors. Section 14 tasks the regulatory authority with establishing mechanisms for grievance redressal and the prevention of fraud, mis-selling, and unfair trade practices. These measures are essential for the Indian market, where retail participation is high and protection from predatory practices is a major public policy concern.
Section 15 mandates that every issuer, custodian, and trading platform must maintain adequate systems for cyber security, operational resilience, and business continuity. This acknowledges the unique risks associated with digital assets, such as smart contract vulnerabilities and private key compromises. By requiring these entities to have robust fallback systems, the Bill seeks to ensure that the digital financial infrastructure remains stable even during technical disruptions.
The Bill also introduces a rigorous audit regime in Section 22. Every registered entity must prepare an audit report at prescribed intervals, authored by a qualified auditor. These reports must be submitted to the regulator and made available to token holders, providing an external layer of verification for the “on-chain” data. Should an audit reveal material irregularities or non-compliance, the regulator is empowered to take corrective action or impose penalties.
Adjudication, Offences, and Penalty Structures
To ensure effective enforcement, the Bill provides for a comprehensive adjudication and appellate mechanism in Chapter VIII. Section 16 outlines the procedure for adjudging penalties, requiring the appointment of an Adjudicating Officer. The officer is granted the powers of a civil court under the Code of Civil Procedure, 1908, for the purposes of summoning witnesses and the discovery of documents.
While adjudging the quantum of a penalty, the officer must consider the repetitive nature of the default, the loss caused to investors, and the amount of disproportionate gain made by the defaulter. This principles-based approach ensures that penalties are proportionate to the severity of the violation. Section 17 designates the Securities Appellate Tribunal (SAT) as the appellate body for the Act, ensuring that appeals are handled by a specialized tribunal with deep expertise in financial law.
Chapter IX defines the offences and sets out severe penalties. Under Section 18, issuing tokens without registration, furnishing false information in an offering document, or engaging in manipulative practices are punishable with imprisonment for a term of up to ten years, or a fine of up to twenty-five crore rupees, or three times the amount of gains made. These penalties are aligned with existing securities laws, signaling that the state views fraud in the tokenised asset market with the same gravity as fraud in the traditional capital markets.
Section 19 empowers the regulatory authority to take civil enforcement measures, including issuing cease-and-desist orders, freezing assets, or suspending registrations. The Bill also applies the provisions of search, seizure, and investigation from applicable financial laws, providing the regulators with the tools necessary to combat sophisticated financial crimes.
Transitional Provisions and the Road to Compliance
The Bill includes transitional and savings provisions in Chapter X to facilitate a smooth migration for existing digital asset participants. Section 20 requires any person or entity already engaged in asset tokenisation to comply with the Act within a prescribed period. This prevents a sudden disruption of the market while ensuring that all players eventually come under the regulated umbrella.
Section 21 deals specifically with existing pilots and sandbox arrangements. Any project approved by a regulator prior to the Act is deemed permitted for a specified period, subject to certain conditions. The regulator may, however, require modifications to these projects to align them with the new statutory framework, particularly where investor protection or market integrity is at risk.
The Bill also provides for administrative continuity. Section 23 mandates that the Central Government provide adequate funds for the implementation of the Act, ensuring that the regulators have the financial resources to perform their supervisory and enforcement functions. Clause 24 empowers the Government to make rules and the regulators to make regulations, allowing for a flexible framework that can evolve with technological advancements.
Inter-Legislative Harmony: TPA, Registration Act, and Stamp Duty
The implementation of the Asset Tokenisation (Regulation) Bill, 2026, requires careful synchronization with India’s long-standing property laws. The interaction between Section 3(2) of the Bill and the Transfer of Property Act, 1882, is particularly complex. The TPA requires a registered instrument for the sale of immovable property. If the Bill allows for fractional ownership tokens to be traded without a physical deed transfer for each transaction, it must clarify the point at which a legal “transfer” occurs for the purposes of the TPA.
Furthermore, the Registration Act, 1908, mandates the compulsory registration of documents that transfer interest in land. The current “buyer beware” model in India, where government records are not conclusive evidence of title, remains a hurdle for a fully digital tokenisation system. For tokenisation to truly modernize the market, it would likely require a shift toward a conclusive title system, as advocated by the Supreme Court in recent observations regarding blockchain-based land records.
The Indian Stamp Act, 1899, also presents a significant consideration. Stamp duty is a major source of revenue for State Governments, and the duty is typically triggered by the execution of a transfer instrument. The 2026 Bill must address whether the transfer of a token on a secondary market constitutes a taxable event under the Stamp Act. Failure to harmonize the Bill with state-specific property laws and stamp duty requirements could lead to legal inconsistencies and potential resistance from state authorities.
Real Estate and Infrastructure: A New Investment Paradigm
Real estate tokenisation is the most anticipated application of the 2026 Bill. Traditionally, real estate investment in India has required substantial financial resources, effectively excluding the middle class. Tokenisation changes this by enabling fractional ownership, allowing multiple investors to hold “slices” of high-value properties like commercial buildings or infrastructure projects.
This shift could democratize wealth creation and provide a significant boost to the real estate market in non-metropolitan cities. The Bill provides the legal backing for innovative models such as Systematic Investment Plans (SIPs) in land, which could gain stronger credibility under a regulated framework.
However, the role of The Real Estate (Regulation and Development) Act, 2016 (RERA), must be clearly defined in cases where tokenized assets involve ongoing construction projects. Ensuring that SEBI’s oversight of the investment token does not conflict with RERA’s oversight of the physical development is critical for maintaining market order.
Infrastructure tokenisation also offers the government a tool for public asset monetization. By tokenising the revenue streams of public utilities or transport projects, the state can attract funding from a wider pool of retail investors rather than relying solely on institutional debt. This model could enhance public participation in national development while providing investors with stable, yield-bearing assets.
Conclusion
The Asset Tokenisation (Regulation) Bill, 2026, represents a landmark effort to modernize the Indian financial and property sectors. By providing a statutory framework that recognizes asset tokens as valid representations of value, the Bill addresses a long-standing regulatory gap that has constrained innovation and investor confidence. The multi-regulatory oversight model ensures that tokenisation is integrated into the existing financial architecture, while the severe penalties for fraud demonstrate a commitment to market integrity.
While challenges remain in harmonizing the Bill with traditional property statutes and state-level registries, the legislative intent is clear: to democratize asset ownership and establish India as a global leader in regulated digital finance. The shift toward fractional ownership of real estate and infrastructure has the potential to unlock significant capital, provide the middle class with new investment avenues, and increase the efficiency and transparency of the entire asset lifecycle.
Ultimately, the Bill is a response to the evolving nature of wealth in a digital age. It acknowledges that the future of finance lies in structured, transparent, and technology-driven participation. Whether the specific provisions of this Private Member’s Bill are enacted or serve as a blueprint for subsequent government legislation, the introduction of the Asset Tokenisation (Regulation) Bill, 2026, has fundamentally changed the conversation around digital assets in India, moving it away from speculative uncertainty and toward a future of regulated, asset-backed innovation.
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