• India's fintech market is projected to reach $150 billion by 2025
• Tokenisation is key to enhancing financial inclusion in India. Cross-border interoperability is crucial for tokenised asset transfer.
• India's fintech market is projected to reach $150 billion by 2025
• Tokenisation is key to enhancing financial inclusion in India. Cross-border interoperability is crucial for tokenised asset transfer.
By Urav Soni
India stands at a pivotal moment in its digital finance journey. With a thriving fintech ecosystem and a tech-savvy population driving innovation, the country is well-positioned to lead the next wave of financial transformation. Tokenisation, converting real-world assets into digital tokens—has emerged as a key enabler in this shift, with the potential to broaden access to capital, fuel economic efficiency, and reimagine how value moves across markets. But to truly harness this momentum, India must balance innovation with regulatory foresight.
The potential for transformation lies in tokenisation, which can bring about profound changes in financial inclusion and market participation, as well as sector-specific improvements in operational efficiency. The presence of a robust digital infrastructure, including 18.6 billion Unified Payments Interface (UPI) transactions per month and 80 per cent of the fintech market projected to be $150 billion by 2025, is indicative of India's ability to thrive. To fully exploit this opportunity, India must confront significant structural obstacles, such as unclear laws, fragmented regulation, and a lack of common sense with other nations that could hinder its potential scale and investor confidence.
India’s progress in digital finance has been remarkable. The establishment of over 10,000 fintech companies and the widespread adoption of real-time payment systems like UPI has established a solid groundwork for financial innovation. The ecosystem is undergoing rapid changes, but the legal and regulatory systems are still rapidly catching up, particularly in areas like tokenised finance, decentralised finance (DeFi), and Blockchain-powered transactions.
These technologies operate differently than traditional finance. Unlike traditional frameworks, they are borderless, automated, and often do not require intermediaries, which makes them more difficult to control. While a tokenised asset can be held or transferred globally in seconds, there is no clear legal framework for rights enforcement in the event of disputes.
Long-term institutional involvement is hindered by the lack of legal clarity. International investors will be reluctant to engage with Indian digital assets if there are no solid legal basis for contract enforcement or dispute resolution. However, due to uncertainty in the rules under which tokenised finance can be brought to bear on deepening financial inclusion and bring capital from abroad, it is still too late to exploit these opportunities.
Our research on tokenisation indicates that scalable digital finance can be achieved through legal certainty, particularly in emerging markets like India. It is crucial to provide enforceable ownership rights, clear contractual terms, and strong investor protection for tokenised assets, both in the UK and internationally. India currently lacks a formal legal definition of digital tokens and does not have an agreed-upon policy framework for all digital assets. The inability to define tokenisation is a hindrance to high-value asset classes, such as real estate, infrastructure, and sovereign debt.
India has the potential to influence the international discourse on fintech, as evidenced by its 2023 presidency. The implementation of international standards, such as anti-money laundering measures, token classification, and investor protection, will enhance India’s appeal to foreign investors and aid local start-ups in expanding globally.
The inherent global nature of tokenised assets enables their seamless transfer across Blockchain networks and jurisdictions. Even so, their freedom is restricted by disorganised legal frameworks and differing regulatory language across nations.
Achieving cross-border legal enforceability is a strategic requirement for Indian banks, start-ups, and non-banking financial companies (NBFCs), as they leverage global DeFi protocols or tokenised asset platforms. Hence, it is necessary for India to participate actively in international policy discussions, promote mutual recognition agreements and standardise frameworks on asset classification and rights of investors.
The regulation of new technologies isn’t about deciding whether to pursue innovation or safety, but rather about creating a framework that provides both. In order to properly calibrate tokenised finance, three principles must be employed:
Protecting Investors Without Slowing Progress: The speed of innovation should not be a concern for investor protection. It is important to implement regulations that grant investors, particularly retail participants, the opportunity to access transparent disclosures, credible platforms, and recourse mechanisms in case of fraud or technical difficulties.
The establishment of trust while avoiding innovation will be supported by stricter standards for token issuance, more rigorous code audit requirements and increased data protection norms.
Inspiring Innovation Through Workshops And Trials: One-size-fits-all regulation can limit progress. Instead of other options, India should establish regulatory sandboxes to facilitate the testing of tokenised products in controlled environments. Through these pilots, lessons can inform practical policy, as demonstrated in GIFT City’s existing tokenisation initiatives in the wild.
By allowing regulators to engage with developers and build capacity, mutual understanding and responsiveness can be improved.
Starting With Cross-Border Compatibility: Tokenised assets are not bound by borders, but most regulations still do. India should work alongside other nations to establish and enhance global standards, including shared token definitions, dispute resolution protocols, and digital identity standards that enable effective asset transfer and legal enforcement across jurisdictions.
Key actions will include participation in international standards bodies and establishment of bilateral regulatory alliances.
With its $1 trillion digital economy target by 2030, India has the potential to spearhead the next wave of global digital finance. The legal and regulatory framework must be innovative, globally compatible, and ready for the future. The implementation of a consolidated digital asset policy, which includes clear legal definitions, cross-border enforcement, and responsible innovation, will be essential. India must become a digital finance powerhouse, as the global tokenisation market is expected to reach $16 trillion by 2030.
Real-world value could be the next frontier for crypto and fintech, rather than relying on a new coin or protocol. This may involve digitalisation. This shift, if taken with clarity, coordination and conviction, will open up new doors for India in terms of its financial future.
The author is a Senior Analyst, Capital Markets Policy – India, CFA Institute
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)