The shift to tokenized security can create a host of business opportunities for both startups and established players. Web3 entrepreneurs can create tokenization platforms and offer relevant services including smart contract development, management of tokenized assets, legal and regulatory structuring.

For secondary trading of tokenized assets, investors would need regulated digital exchanges. Establishing a transparent marketplace for such investors is another opportunity in this space. The market of tokenized security would need various ancillary services such as auditing of smart contracts, providing consultancy in areas like code quality, security and legal matters. Tokenized funds focussed on specific asset classes can be another business opportunity. Asset managers can create specialized investment funds for digitized real estate, infrastructure, and other sectors.

Several countries have already adopted tokenised securities into their financial platforms. The United States enforces regulatory acceptance for security tokens using present securities laws and platforms. In Europe, the Markets in Crypto-Assets Regulation (MiCA) and DLT Pilot Regime allow blockchain-based trading under tight supervision.

Singapore and Switzerland have accepted tokenised securities through sandbox and new regulations, providing knowledge for issuers and investors. India, however, does not have a law accepting blockchain-based securities.

In India, existing laws such as the Securities Contracts Regulation Act (SCRA), Companies Act, and SEBI rules may apply to tokenized securities. According to SEBI’s 2021 operational guideline, appeal of DLT was agreed but regulatory overlap, cybersecurity issues, and lack of legal clarity were identified as challenges to full adoption.

As the world continues to record a shift from established markets, India needs to align its laws and rules to help tokenised securities market take-off. The Companies Act and SCRA call for real records through licensed registries. Blockchain ledgers, being decentralized and digitally secured, do not currently hold a legal status. This avoids acceptance of tokenised assets as ownership records.

Depositors such as NSDL and CDSL also face an unclear role in a DLT-based model, which removes the need for centralized record-keeping. Cross-border trading brings additional challenges. India's Foreign Exchange Management Act (FEMA) and FDI policies do not yet accommodate decentralised trading platforms. Investor protection laws also remain silent on smart contract audits and code quality, raising risks of systemic vulnerabilities.

In order to fill up the regulatory space, a structured and controlled rollout has been hinted at. A sandbox focused on tokenised securities would enable it to experiment with blockchain-based debt and equity instruments on a small scale. SEBI was empowered to give limited regulatory permits to participating entities, including startups, brokers, and institutional investors. Trials would also include smart contract audits, blockchain registries, and interaction with existing infrastructure like RTAs and clearing systems.

Countries like Germany, the UK, Japan, and the UAE have adopted targeted reforms. Germany permits blockchain-based debt instruments under its Electronic Securities Act. The UK Law Commission has accepted smart contracts as legally enforceable.

Japan allows security tokens under its Financial Instruments and Exchange Act. In a partnership, Ava Labs and Bitget have introduced initiatives in India to increase blockchain adoption in the country. According to a press release released in April 2025, the 'HODL ON' tour started with the events at Delhi and Bangalore for the sake of awareness.

Tokenised securities have become a reality in various jurisdictions across the globe. Although early initiatives such as the SEBI’s operational guidelines for using DLT in security markets have been taken, the tempo needs to be maintained. (IPA Service)