GIFT City's Crypto Sandbox: Can Gujarat Build a Home-Grown Dubai?

India has one place where rupee rules give way to dollar signs on street-corner billboards: Gujarat International Finance Tec-City (GIFT City), near Ahmedabad. Inside the special-economic-zone, a single regulator—the International Financial Services Centres Authority (IFSCA)—oversees banking, markets and insurance. In 2024 that regulator quietly added a third frontier: a regulated sandbox for virtual-asset and tokenisation pilots.

What the sandbox already permits

• Tokens backed by real-world assets. On 26 February 2025 the IFSCA released a consultation paper titled “Regulatory Approach towards Tokenization of Real-World Assets.” The paper invites feedback on issuance, trading, custody and settlement rules for digital tokens, and it states that sandbox exemptions are available while the final framework is drafted.
• Open door for foreign fintechs. A Ministry of Information & Broadcasting note on the broader FinTech sandbox says entities from any FATF-compliant jurisdiction may apply, provided they operate inside the IFSC perimeter.
• Live token pilots. One widely publicised example is Terazo Network’s “ORYX” fund, a US $7 million single-asset vehicle that tokenises a grade-A commercial project inside GIFT City’s SEZ. Terazo markets ORYX as “India’s first regulated tokenised property.”

At present, sandbox participation is restricted to qualified or accredited investors. IFSCA’s fund-management rules require either accredited-investor status or a minimum subscription of US $250,000 for unaccredited participants in such schemes. Retail Indian residents therefore cannot yet open trading accounts in GIFT for spot Bitcoin or stable-coin pairs.

Where the rulebook is headed

Two Indian outlets—NDTV Profit and ABP News—reported in December 2024 that IFSCA aims to publish a full regulatory framework for crypto exchanges and tokenisation entities during 2025, citing officials involved in the drafting process. An internal asset-tokenisation committee, mentioned in the press and in a January 2025 GIFT City bulletin, is expected to deliver its recommendations in the middle of the year.

While IFSCA has not confirmed dates publicly, the timetable—consultation paper in February, committee report mid-year, codified rules by year-end—mirrors its earlier rollout for fund-management and bullion-exchange regulations.

Why companies are watching closely

• Tax treatment. Under Section 80LA of the Income-tax Act an IFSC unit can claim a 100 % income-tax holiday for any 10 consecutive years within a 15-year window, and non-resident investors in listed securities pay 0 % capital-gains tax. Authorities have indicated the same headline incentives will apply to regulated token issues.
• Regulatory clarity versus mainland India. Onshore exchanges still face a 30 % flat crypto-gains tax and 1 % TDS. IFSCA, by contrast, has explicit statutory power to license virtual-asset businesses, modelled on Dubai’s VARA and Singapore’s MAS.
• Time-zone advantage. Units inside GIFT operate on the same clock as the National Stock Exchange, allowing hedge funds to run real-time basis trades between Indian equities and tokenised depository receipts when rules permit.

Roadblocks that remain

1. Wholesale only—for now. The sandbox bars retail investors; a broader licence will hinge on AML metrics from the pilot phase.
2. Ring-fence rule. RBI policy currently prevents free repatriation of crypto gains into mainland rupees without special approval, limiting appeal for residents who do not hold foreign-currency accounts.
3. Liquidity risk. With only a handful of pilots live, secondary-market depth is thin; IFSCA’s own papers highlight the need for robust custody and clearing infrastructure before retail access can be contemplated.

Could GIFT rival Dubai?

Dubai offers zero personal income tax but introduced a nine-per-cent corporate levy in 2023. By contrast, an IFSC unit that selects the 10-year tax window pays no Indian income tax at all during that period. Add the comfort of Indian courts for dispute resolution, and GIFT could become a bridge for investors who want regulatory certainty without moving capital overseas.

Success, however, depends on speed. Dubai’s VARA already lists multiple retail-facing exchanges. If Gujarat’s framework slips past 2025, the first wave of global liquidity may remain anchored in the Gulf.

Key milestones to watch in 2025

Bottom line

GIFT City’s crypto sandbox is small today, but the legal foundations—single-window regulation, headline tax breaks and a public consultation on tokenisation—are already in place. If IFSCA meets its 2025 timetable, Gujarat could give Indian and overseas investors something they lack: a fully regulated, low-tax, on-shore venue for digital-asset trading and real-world-asset tokenisation. Achieving that before the decade’s end is India’s best chance at building a “home-grown Dubai” without leaving the subcontinent.