Tokenization in Finance: SEBI, RBI, GIFT City Testing Future Ownership

A simple guide to how digital tokens are changing the way we own bonds, real estate and cash

Imagine being able to buy a small slice of a commercial building in Mumbai, or a piece of a government bond, for the price of a dinner out and having that ownership recorded instantly and safely on a digital system that cannot be tampered with. This is the basic idea behind tokenization, one of the biggest shifts underway in global and Indian finance today.

Tokenization is not cryptocurrency, and it is not a speculative fad. It is a new way of recording who owns what, using technology that many banks, regulators and asset managers around the world including in India are now actively testing. This article explains what tokenization is, how it works, where it is being used in India, and what investors should know before getting excited about it.

What Is Tokenization?

In simple terms, tokenization means converting the ownership of a real asset such as cash, a bond, a piece of property, or even gold into a digital "token" that lives on a blockchain or similar digital ledger. Each token represents a share of that asset, similar to how one unit of a mutual fund represents a small share of a larger portfolio.Instead of owning a paper certificate or a line entry in a company's private database, you own a digital record that is visible, verifiable, and can be transferred to someone else with a few clicks, subject to the rules that apply to that asset.

How Does Tokenization Actually Work?

While the technology sounds complex, the process itself follows a fairly simple sequence of steps:

•  An asset is chosen this could be a bond, a building, a fund unit, or a pool of cash.

• The asset is placed with a trusted custodian or issuer, who ensures it is legally sound and properly held.

•  Digital tokens are created, each representing a fixed share of the underlying asset.

• These tokens are recorded on a distributed ledger a shared digital record that many parties can see but no one can quietly alter.

• Investors can then buy, sell or transfer these tokens, often faster than with paper-based systems.

• Depending on how the token is structured, holders may later redeem it for cash or for a share of the actual underlying asset.

Why Is This Idea Gaining Attention Now?

1. Faster settlement

Traditional markets often take two to three working days to settle a trade, because several intermediaries need to check and confirm it. A digital ledger can allow this to happen in near real time, which lowers the risk that something goes wrong between the trade and the final transfer.

2. Smaller ticket sizes

Big-ticket assets like commercial real estate or high-value bonds have traditionally been out of reach for ordinary investors. Tokenisation can divide these into smaller, more affordable units, letting more people participate within whatever regulatory limits apply.

3. Better liquidity for hard-to-trade assets

Assets like property or unlisted debt are usually difficult to buy and sell quickly. Recording them digitally can make transfers smoother, which may improve liquidity over time, though this depends heavily on enough buyers and sellers actually using the system.

4. A clearer paper trail

Every transaction on a shared digital ledger is time-stamped and visible to relevant parties, which can reduce disputes over who owns what and when a transfer took place.

5. Lower running costs

Much of the cost in finance today goes into reconciliation, verification and paperwork. Automating parts of this process through smart contracts small pieces of code that execute rules automatically can cut down on manual work and errors.

Where Is This Happening in India?

India's regulators have moved from watching this space to actively testing it.

• SEBI has piloted blockchain-based issuance for corporate bonds, marking one of the more concrete steps by an Indian regulator toward using distributed ledger technology in mainstream capital markets.

• SM REITs and fractional ownership platforms, regulated by SEBI, already let investors buy small shares of commercial real estate, an early and practical form of asset tokenisation within a formal rulebook.

• The IFSCA at GIFT City, Gujarat, runs a regulatory sandbox where fintech firms can test tokenised products, including for NRI and global investors, under more flexible rules than the rest of the country.

• The Reserve Bank of India continues to watch the money and payments side closely, including its own Digital Rupee (CBDC) pilot, while applying know-your-customer and anti-money-laundering standards to any tokenised product that touches the banking system.

Despite this progress, India does not yet have one unified law specifically written for tokenised securities. Platforms currently have to work within existing securities, trust and company law, and SEBI has signalled that it will act against anyone who tries to bypass its oversight using the word "blockchain" as cover.

Traditional Ownership vs Tokenised Ownership

Features Record of	Traditional Ownership	Tokenized Ownership
Minimum investment	Often high (e.g., a full property or bond lot)	Can be very small (a fraction of the asset)
Settlement time	Typically T+2 or T+3 working days	Can be near-instant on a digital ledger
Recordof ownership	Paper or centralised database entries	Entry on a shared, tamper-resistant ledger
Transferability	Can involve paperwork and intermediaries	Can be transferred digitally, subject to rules
Regulatory framework in India	Well established (SEBI, RBI, RERA)	Still evolving (SEBI pilots, IFSCA sandbox)

What This Could Mean for Investors

• Access to assets that were previously out of reach, such as fractions of commercial property or large bond issues, subject to eligibility and suitability rules.

• The possibility of faster buying, selling and settlement compared with paper-heavy processes.

•More transparency around who owns a token and how it has moved, since the ledger keeps a running record.

•Potentially lower costs over time, as manual reconciliation work is reduced, though this benefit may take years to show up for retail investors.

The Risks and Gaps Investors Should Not Ignore

• Regulatory uncertainty: India does not yet have a dedicated, finalised law for tokenised securities so investor protections can vary by platform and structure.

•  Technology and custody risk: someone still has to safely hold the digital keys and the underlying asset; a weak custodian undoes the benefit of a strong ledger.

• Thin markets: a token is only as liquid as the number of genuine buyers and sellers actively trading it, and many tokenised products in India are still new and small.

• Platform risk: not every platform offering "tokenised" products is registered with SEBI or another regulator; investors should always check this before committing money.

• Fragmentation: different blockchain platforms do not always talk to each other, which can limit how easily tokens move between systems.

The Road Ahead

Globally, tokenised real-world assets have grown rapidly, and large institutions abroad have filed for tokenised versions of government debt and money-market products. In India, momentum is building through SEBI's bond pilot, the SM REIT framework, and the GIFT City sandbox, alongside continuing work by the RBI and the finance ministry on modernising bond market infrastructure.

Over the next few years, it is reasonable to expect more tokenised bonds, wider fractional real estate options, and eventually a clearer, unified rulebook. Until that rulebook is in place, tokenisation in India will likely keep growing carefully, inside regulatory sandboxes and approved structures, rather than as an open, unregulated market.

Conclusion

Tokenisation is a genuine shift in how ownership can be recorded and transferred, not just industry jargon. It has the potential to make investing more accessible, transactions faster, and records more transparent. At the same time, in India it remains an evolving, regulator-supervised space rather than a fully settled one. Investors exploring tokenised products should look closely at who regulates the platform, how the underlying asset is held, and how easily a token can actually be bought or sold before committing any money.

Disclaimer

This article is for general informational and educational purposes only and does not constitute investment, legal, or tax advice. Tokenised financial products, including bonds, real estate instruments, and fractional ownership platforms, are subject to evolving regulation in India and may carry risks including illiquidity, custody risk, and platform risk. Readers should independently verify the regulatory status of any platform or product and consult a SEBI-registered investment adviser and/or a qualified tax advisor before making any investment decision. Mutual fund and securities market investments are subject to market risks; please read all scheme- or offer-related documents carefully before investing.

Sources

1. Kotak Mutual Fund, "Tokenization in Financial Services – Next Potential Shift in Finance," kotakmf.com, December 2025.

2. Coherent Market Insights, "India Asset Tokenization Market Size & Trends, 2026–2033."

3. CryptoTimes, "SEBI Launches Blockchain Pilot to Tokenize Corporate Bonds in India," May 2026.

4. Asset Tokenization Blog, "RWA Tokenization: The Complete 2026 Guide," March 2026.

5. Nadcab, "Real Estate Tokenization in India: Critical SEBI Guide 2026," March 2026.

6. The Policy Edge, "Why India Should Treat Tokenization as Financial Infrastructure Reform," 2026 (referencing IMF 2026 report).

7. Ziro Market, "RWA Tokenization 2026 — Why It's Booming," June 2026.

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