India Launches Tokenized Corporate Bonds With Demat 2.0
SEBI’s Demat 2.0 pilot recorded $107 million in corporate bond issuance, combining distributed ledger technology with India’s wholesale CBDC for atomic settlement.
India has moved tokenized securities deeper into its regulated financial infrastructure, completing the first corporate bond issuances under a system that combines distributed ledger technology with central bank digital currency settlement.
The Securities and Exchange Board of India (SEBI) said on Sept. 10 that three issuers raised a combined ₹1,025 crore ($107.2 million) through its Demat 2.0 pilot, which is designed to test a new framework for issuing, holding, trading and settling corporate bonds.
Unlike blockchain products operating alongside traditional financial infrastructure, Demat 2.0 integrates tokenization directly into India’s existing securities market.
Three Issuers Complete Tokenized Bond Sales
REC Ltd. became the first company to issue bonds through Demat 2.0 on Sept. 7, raising ₹500 crore ($52.3 million) from 18 investors.
L&T Ltd. followed on Sept. 9 with another ₹500 crore from four investors, while IIFL raised ₹25 crore ($2.6 million) from one investor on the same day.
Under the new infrastructure, corporate bonds are created as native digital tokens on a distributed ledger owned by India’s depositories. The shared ledger allows authorized market institutions to access a synchronized record of ownership.
Despite the technological change, SEBI emphasized that tokenization does not create a new type of financial instrument. The bonds retain the same ISIN, coupon, maturity, covenants, credit rating, issuer obligations and investor rights as conventional dematerialized corporate bonds.
Existing requirements covering disclosures, listings, credit ratings and debenture trustees also remain in force.
CBDC Enables Atomic Settlement
A key component of Demat 2.0 is its connection to the Reserve Bank of India’s wholesale central bank digital currency, the e₹, through the RBI’s Unified Market Interface.
This allows the securities and cash sides of a transaction to move simultaneously through atomic settlement, reducing the settlement risk that can arise when securities and funds are transferred separately.
SEBI said the infrastructure could also allow issuers to receive proceeds on the same day after bidding, compared with the usual two to three days under the existing process.
Smart contracts can automate parts of the bond lifecycle, including interest payments and redemption. Because ownership information is maintained on a shared ledger, authorized institutions can also see updated bondholder records without relying on separate records that must later be reconciled.
“On the shared ledger, the details of bondholder are visible to all authorized institutions at once, and payment in e₹ reaches the bondholders’ CBDC wallets on the due date,” SEBI said.
The regulator added that these features are expected to make corporate bond issuance, settlement and servicing faster, more efficient and less prone to errors.
Pilot Starts With Institutional Issuance
Demat 2.0 is being introduced in three stages. The first phase focuses on institutional corporate bond issuance, while secondary-market trading and retail participation are planned for subsequent phases under SEBI’s Regulatory Sandbox.
The regulator said the bonds will ultimately trade in the same manner as existing securities held in dematerialized form, helping avoid fragmentation between tokenized and conventional markets.
SEBI also described the launch as a global first: corporate bonds issued natively on a distributed ledger, with ownership recorded by a country’s statutory depositories and the payment leg settled in central bank digital currency within existing regulated market infrastructure.
Tokenization Moves Into Regulated Market Infrastructure
The significance of Demat 2.0 extends beyond putting bonds on a distributed ledger. The pilot shows how tokenized securities and central bank money can operate together inside an established capital market without changing the legal nature of the underlying asset.
That distinguishes the initiative from many tokenization projects built as separate blockchain platforms or experimental financial products. Here, the technology changes how ownership, settlement and servicing are handled while established investor protections remain intact.
If later phases successfully introduce secondary trading and broader investor access, Demat 2.0 could provide a practical test of whether distributed ledgers and CBDCs can improve capital-market infrastructure without requiring a parallel financial system. India’s first ₹1,025 crore of tokenized bonds offers an early real-world example of that model moving from experimentation into regulated issuance.
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