India has taken a major step toward blockchain-based capital markets with the launch of Demat 2.0, a pilot program for tokenized corporate bonds settled through the Reserve Bank of India’s wholesale digital rupee.
The initiative targets a corporate bond market worth roughly $610 billion to $620 billion, according to industry estimates for March 2025. Regulators are testing whether distributed ledger technology can make bond settlement faster, reduce reconciliation work and automate parts of asset servicing.
Demat 2.0 Pilot Tests Atomic Settlement
The Securities and Exchange Board of India and the Reserve Bank of India launched the pilot at the Global Fintech Fest in Mumbai. The project brings together depositories, stock exchanges, banks and payment infrastructure providers.
The pilot currently covers three issuers, with tokenized bonds totaling ₹1,025 crore:
- REC issued ₹500 crore in tokenized bonds.
- Larsen & Toubro issued ₹500 crore.
- IIFL issued ₹25 crore.
The system links tokenized securities with the RBI’s wholesale central bank digital currency through the Unified Market Interface. This allows atomic delivery-versus-payment, meaning the bond and payment can transfer simultaneously.
Digital Rupee Could Reduce Settlement Risks
The technology could also automate interest payments and redemptions through smart contracts. A shared ledger gives authorized participants a common record of ownership, potentially reducing the need to reconcile separate securities and cash records.
However, tokenization does not turn corporate bonds into cryptocurrencies. The underlying instruments retain their conventional issuer, coupon, maturity and credit risks. The technology changes how ownership and settlement are recorded and processed.
The initial pilot focuses on institutional investors. Regulators expect future phases to explore wider participation, including retail investors and potentially other asset classes such as equities, mutual funds and gold.
The experiment will face an important test when tokenized bonds begin secondary-market trading. Faster settlement alone cannot create liquidity or investor demand. Regulators will also need to address custody, accounting, taxation and interoperability before tokenized bonds can move from a controlled pilot into mainstream markets.
