Digital Assets and Tokenisation in GIFT City IFSC: What the Law Currently Permits

Few subjects attract more confident misstatement than the legal status of digital assets in GIFT City IFSC. The accurate position as at 17 September 2026 is narrower than the enthusiasm suggests and more interesting than a flat prohibition. It has three layers: what IFSCA has authorised, what Indian tax and anti-money-laundering law says about virtual digital assets wherever they are held, and what has merely been proposed.

Layer One: What IFSCA has Authorised

Technology services, yes. The IFSCA FinTech Sandbox Framework of 16 March 2026 lists, among the activities eligible for testing, solutions or services leveraging Distributed Ledger Technology, Web 3.0, and metaverse technologies, and expressly includes “Tokenization support services” in its list of eligible activities. Separately, the IFSCA (TechFin and Ancillary Services) Regulations, 2025 provide an authorisation route for technology and support service providers, and the sandbox framework requires an applicant to consider whether those regulations apply before seeking sandbox entry.

So an entity may, subject to authorisation, provide technology and support services related to tokenisation from GIFT IFSC, and may test DLT-based solutions in a sandbox under Boundary Conditions (Article 33).

A trading regime for crypto-assets, no. As at the cut-off date, no IFSCA regulation or framework was traced that authorises the issuance, trading, exchange or custody of crypto-assets as a regulated activity in GIFT IFSC in the way that the fund management, capital market intermediary, banking, insurance and payment services regulations authorise their respective activities. The sandbox is a testing environment whose relaxations expire at the end of the testing stage; it is not a licence.

Tokenisation of real-world assets is under consultation. IFSCA published a consultation paper on a regulatory approach towards tokenisation of real-world assets. A consultation paper is a proposal document. It does not create rights or permissions, and until a framework is notified, an entity cannot rely on it as authority for an activity.

This distinction, between a consultation paper, a framework and a regulation, is the single most important discipline in this area.

Layer Two: Indian Law that Applies Regardless

Two areas of Indian law remain relevant to virtual digital assets in GIFT City IFSC: income-tax law, which determines their tax treatment, and anti-money laundering law, which governs applicable due diligence, record-keeping and reporting obligation

Income-tax. Section 2(111) of the Income-tax Act, 2025 defines “virtual digital asset” broadly. It covers any information, code, number or token, other than Indian or foreign currency, generated through cryptographic or other means, providing a digital representation of value exchanged with or without consideration, with the promise or representation of having inherent value, or functioning as a store of value or unit of account, including in financial transactions or investment, which can be transferred, stored or traded electronically. It also covers non-fungible tokens and tokens of similar nature, any other digital asset notified by the Central Government, and any crypto-asset being a digital representation of value that relies on a cryptographically secured distributed ledger or similar technology, whether or not otherwise covered.

The definition is deliberately technology-agnostic and wide. Any structure involving tokens should be tested against it, because the Act’s VDA-specific provisions on computation, set-off and withholding follow from the characterisation, not from where the asset is held.

Anti-money laundering. Virtual digital asset activities have been brought within India’s anti-money laundering framework, and an IFSC entity is in any event subject to IFSCA’s AML, CFT and KYC guidelines as a regulated entity (Article 35). A business dealing in tokens from the IFSC therefore faces the same customer due diligence, record-keeping and reporting architecture as any other regulated entity, in addition to any activity-specific requirements.

Layer Three: What is Only Proposed

On 13 March 2026, the Asset Tokenisation (Regulation) Bill, 2026 was introduced in the Rajya Sabha by a Member of Parliament as a private member’s bill. It proposes legal recognition of asset tokenisation and a statutory framework for issuance, trading, custody and settlement of tokenised assets representing real-world holdings, with regulatory oversight and investor protection, contemplating tokenisation of assets such as real estate, infrastructure and intellectual property.

Two points of legislative reality are essential. A private member’s bill is not government legislation; it is introduced by an individual member and very rarely becomes law. And introduction is only the first stage: as at 17 September 2026, the Bill had not been enacted, and nothing in it is operative law.

Any description of this Bill as an Indian tokenisation law, or as the framework for GIFT IFSC, would be wrong.

How to Analyse a Tokenisation Proposal in GIFT IFSC

For a business considering a token-based structure, the questions in order are:

1. What is the underlying asset or right? A token representing a security, a fund unit, a bullion holding or a payment instrument is regulated according to what it represents. Existing frameworks may already apply: bullion depository receipts, for example, are notified as securities and traded on a recognised exchange (Article 28), and fund units are governed by the fund management regulations.
2. Is the activity within an existing IFSCA authorisation? Issuing, dealing, advising, custody and settlement are all licensed activities under existing regulations when they relate to recognised financial products.
3. If not, is a sandbox appropriate? The sandbox allows time-limited testing with relaxations, and an application must specify the relaxations sought.
4. What is the tax characterisation? Section 2(111) is broad enough to catch most token structures, and the consequences differ materially from those for conventional instruments.
5. What AML obligations attach? These apply from the first customer, not from the first profit.

The Honest Summary

As of 17 September 2026, GIFT IFSC allows certain technology and support services related to tokenisation, subject to applicable authorisation, and provides a sandbox for testing DLT-based solutions. IFSCA has also sought views on a proposed framework for tokenising real-world assets. However, a general regulatory framework for crypto-asset trading has not been identified. Indian tax and anti-money laundering laws also apply to relevant virtual digital asset activities.

For businesses considering digital asset or tokenisation projects in GIFT City IFSC, the starting point is to understand which activities are already permitted and which remain subject to regulatory developments. A proposed framework should not be treated as an existing approva

Frequently Asked Questions

1. Are digital assets permitted in GIFT City IFSC?

Technology and tokenisation support services may be permitted subject to applicable IFSCA authorisation. A general crypto-asset trading regime has not been notified.

2. Does IFSCA allow tokenisation of real-world assets?

IFSCA has consulted on a regulatory framework for real-world asset tokenisation, but a consultation paper does not grant regulatory permission.

3. How are digital assets taxed in India?

Section 2(111) of the Income-tax Act, 2025 defines virtual digital assets broadly, potentially bringing qualifying token structures within the applicable tax provisions.

4. Does AML law apply to digital asset businesses in GIFT IFSC?

Yes. Applicable anti-money laundering, counter-financing of terrorism and KYC obligations must be assessed alongside activity-specific regulatory requirements.

5. Has the Asset Tokenisation (Regulation) Bill, 2026 become law?

No. As at 17 September 2026, the Bill had not been enacted and remained a proposal.