Unlocking India’s Intangible Assets: A Blueprint for Blockchain-Based IP Securitisation

Introduction

The recent World Intellectual Property Organisation (WIPO) Intellectual Property (IP) Finance Dialogue 2025 underscored the rising significance of intangible assets in the global economy and fulfilling the economic potential of IP. Intellectual property is commonly understood as the creative utilisation of human intellect for developing goodwill, brand value, and scientific innovations. Its identity as an invaluable financial asset remains undermined.

The current economy widens the financing gap, exacerbating the shortfall between existing affordable capital and traditionally available funds. With the monetisation of IP, a popular source of revenue streams from innovation rises, coupled with regulatory barriers such as high transactional costs, illiquidity, and fluctuating valuations. Using IP as a financial asset contributes to building investor confidence by creating growth opportunities in sectors such as pharma, media, and nascent startups. IP assets are versatile as they act as security to the investors and offer a competitive edge to market players.

Integrating decentralised blockchain technology with IP enables smooth management and licensing of intangible IP assets due to its tamper-proof record-keeping system and transparent ownership status. Thus, blockchain is a key element in realising IP assets.

Therefore, crafting a holistic regulatory framework becomes necessary as the global discourse on IP financing gains acceptance.

Blockchain-Based Strategy for IP Securitisation

Blockchain-based IP securitisation is a novel form of structured finance that executes pre-defined arrangements. The conversion of abstract rights into efficient, tradeable, and financial instruments poses a massive challenge to the securitisation of IP. Blockchain technology serves as a catalyst in addressing this limitation. The process starts off-chain, where income-generating IP assets, such as music royalties or licensing fees from a portfolio of pharmaceutical patents, are identified and pooled, following which ownership is verified and future cash flows are valued. Post valuation, the assets are isolated under a Special Purpose Vehicle (‘SPV’),  a crucial confidence-increasing measure as a SPV is a bankruptcy-remote entity ensuring protection of investors from any potential financial distress the original IP owner faces. 

The on-chain execution starts with the SPV issuing digital tokens on the blockchain. Each token is a ‘Legal wrapper’, representing a fractional claim on the IP asset’s future income. Among the tokens, the ERC-1155 standard is well-suited as a single contract can efficiently manage both a unique token representing the entire IP pool and thousands of identical, fungible tokens representing the fractional shares sold to investors. 

The core component of this arrangement is the smart contract. While the enforceability of smart contracts remains a grey area under the Indian legal framework, they function as an automated fiduciary. The terms of the royalty distribution waterfall are codified in this self-executing agreement. The contract performs the role of a paying agent, as upon receipt of revenue, it automatically executes payments to token holders. This process of ‘trustless automation’ aims to eliminate counterparty risk and administrative risk inherently present in traditional models. 

For instance, the music streaming platform ‘Audius’ claims its protocol has been designed to give everyone the ‘freedom to share, monetise and listen to any audio’. Its protocol has been designed to track on-chain metrics and distribute value directly to artists, demonstrating the viability of on-chain value distribution tied to IP. However, the platform operates in a regulatory vacuum, highlighting the urgent need for a clear framework before large-scale adoption of such models can be made feasible for formal financial instruments.

Challenges to IP Securitisation under the Indian Regulatory Framework

Section 2(h) of The Securities Contracts (Regulation) Act, 1956, defines what constitutes valid securities. IP-backed tokens do not naturally fall within the marketable securities, such as shares, debentures, and bonds. Conventional instruments are primarily built on marketability, transferability, ownership, and capital mobilisation. Even though IP-backed tokens are not explicitly mentioned under the statutory provisions, they meet the applicable securities parameters. The tradability and underlying financial interest with the owner, which can be transferred to yield profit, entails including IP-derived securities within the ambit of the SCRA. The collateralisation and securitisation of IP assets becomes pertinent in the backdrop of India’s emerging digital economy. The Howey test, laid down by the US Supreme Court, outlines that to qualify as a security, there needs to be an investment in a common enterprise with the valid expectation of profit from the effort of others. IP-derived assets meet the threshold set by the Howey test as investors contribute capital for fractional rights in IP, leading to revenue collection from royalties and licensing. Further, monetary returns from such royalties and licensing revenues reinforce IP assets as securities. Thus, incorporating it within the existing statutes allows for efficient regulation and reinforces liability under the SEBI framework.

The amended definition of Virtual Digital Assets (‘VDA’) under section 2(47A) of the Income Tax Act (IT Act) brought in by the Budget 2025-26 considerably enlarges the scope of the previous definition. However, this development causes fractionalised IP assets to come within the purview of VDA. While this inclusion promises regulatory enhancement, it substantially disincentivises creators and owners due to the higher threshold of obligations imposed on them. The Financial Bill, 2025, applies a flat 30% tax rate on VDA  income from transfers, with no deductions for transaction costs. With the inclusion of crypto-assets under the amended definition, innovators are dissuaded from putting their creations to practical use.

The International Financial Services Authority (‘IFSCA’) has adopted a progressive stance with its Consultation Paper on Tokenisation of real-world assets (‘RWAs’). The paper lists a wide range of potential RWAs, including stocks, bonds, commodities, real estate, and IP. It seeks to understand the suitability element, underscoring that a tailored regulatory approach is needed for each asset class. Regulated custody of digital tokens is vital to ensure investor protection. It is crucial because if an investor buys a token representing a claim on film royalties, using a regulated digital asset custodian would protect their investment from theft or loss, in the same way CDSL or NSDL currently protects dematerialised shares.

Additionally, the inherent vulnerabilities and systematic risks associated with smart contracts could lead to permanent loss or misdirection of royalty payments, rendering robust security audits non-negotiable. It is also essential that any platform used for IP-backed tokens comply with stringent Know Your Customer (‘KYC’) norms to ensure that the investors participating in the market are legitimate and credible. Focus should be on investor exit by safeguarding secondary market liquidity, which will be an important confidence-building measure for investors and turn IP into a viable asset class. 

A deep dissension exists between on-chain transactions and off-chain legal requirements. Section 19 of the Copyright Act, 1957, and Section 68 of the Patents Act, 1970 mandate that any IP assignment must be ‘in writing and duly signed’. An instantaneous token transfer fails to meet this statutory requirement, leading to a legal disconnect between token ownership and the basic IP right. The SARFAESI Act, 2002 (‘the Act’) is practically incompatible with the process of perfecting a security interest on a token, as under Section 13 of the Act, a creditor can take possession of a ‘secured asset’. Under this provision, enforcement without court intervention becomes complex and largely unregulated, especially concerning digital assets held in self-custody wallets.

Way Forward

Presently, the laws governing the transaction between intangible assets and IP financing practices in India fall short in addressing the dynamic considerations of the market and digital space. Therefore, it becomes imperative to tailor the existing laws to accommodate the evolving IP-backed assets. Drawing inspiration from the overarching Singapore Intellectual Property Strategy 2030, embracing a stricter and multifaceted approach that includes economic, technological, and innovation aspects. The SIPS 2030 provides for establishing an ecosystem that prioritises the valuation and authentication of the asset before it is listed for trading. In India, there are currently no oversight bodies for performing due diligence or assessing an asset’s tradability.

Translating Singapore’s success into an actionable plan for India requires targeted legal and institutional reforms. Firstly, institutionalising a nodal body such as the National Intangible Asset Valuation and Disclosure Authority (‘NIAVDA’), which establishes and certifies legitimate ‘Indian Intangible Asset Valuation Standards’. Developing a set of detailed guidelines for the valuation of different classes of IP through NIAVDA and the valuation standards will consequently help champion an Indian IDF, thereby making IA disclosure a prerequisite to accessing capital markets.

Secondly, to mitigate the on-chain/off-chain gap, IP registries like The Office of the Controller General of Patents, Designs and Trade Marks (‘CGPDTM’) and the Copyright Office must develop a secure ‘Digital Asset Bridge’, a secure Application Programming Interface (‘API’). This bridge would cryptographically link a registered IP right to a unique token. An on-chain transfer of this ‘registry-blessed’ token could then be pushed back to the official registry, creating a legally recognised record of assignment that satisfies the ‘in writing’ requirements under the Copyright and Patent Acts. Finally, encouraging local policy initiatives such as ‘IP-Bharat’, an online marketplace for IP services, will help formulate schemes for assisting SMEs in living up to their IP capabilities.

Conclusion

In conclusion, India holds substantial potential to become a global IP powerhouse, as the 2024 WIPO report sheds light on India’s remarkable progress in innovation outputs. Merging blockchain-based tokenisation for transforming intangible assets requires adopting a comprehensive legal framework. As intangible assets gain prominence with technological advancements, this poses much confidence in IP-backed tokens. However, market efficiency and stability concerns are reinforced without specific categorisation and regulatory oversight. Cross-border transactions will be augmented through a strategy that aligns with global standards governing IP assets. Therefore, drawing inspiration from other nations with a roadmap, India gains a fair advantage in establishing a creative capital economy with a forward-looking path in IP financing.

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This article has been authored by Soumya Yadav and Prajjwal Pandey, second-year students at Hidayatullah National Law University, Raipur. It is a part of the RSRR's Blog Series on 'Ideas in Motion: Contemporary Frontiers in Intellectual Property Law’, in collaboration with Ahlawat & Associates.