India has launched a pilot for tokenized corporate bonds, marking a major step toward blockchain-based securities settlement. The initiative has already seen about $107 million in tokenized bonds issued across participating companies.
The pilot forms part of Demat 2.0, a joint effort involving India’s market regulator and central bank. It combines distributed ledger technology with the Reserve Bank of India’s wholesale digital rupee to streamline bond settlement.
Demat 2.0 Targets Faster Settlement
State-owned REC led the first transaction, raising ₹500 crore through a tokenized bond issue. The offering attracted ₹796 crore in bids, showing strong institutional interest in the new structure.
Larsen & Toubro and IIFL have also participated in the broader pilot, bringing the total tokenized corporate bond issuance to ₹1,025 crore.
The system records securities ownership on a permissioned digital ledger. Investors use compatible securities infrastructure alongside wholesale central bank digital currency wallets.
Key features of the pilot include:
- Same-day pay-in, allotment and listing
- Atomic delivery-versus-payment settlement
- Digital records of bond ownership
- Smart-contract support for asset servicing
- Wholesale digital rupee settlement
Institutional Investors Lead the Trial
The initial program focuses on institutional investors rather than retail participants. That approach allows regulators and market infrastructure providers to test the technology under controlled conditions.
Tokenization could reduce reconciliation work because cash and securities can move together. It may also reduce settlement risks and free up collateral that normally remains locked during traditional settlement cycles.
However, the pilot has not yet proven that tokenized bonds will develop deep secondary-market liquidity. The initial REC bonds also face a lock-in period before broader trading can begin.
India’s experiment comes as financial markets globally explore tokenized securities and central bank digital currencies. For India, the project could provide a foundation for expanding tokenization beyond corporate bonds.
If the pilot performs well, regulators could eventually extend similar infrastructure to other financial assets and open participation to retail investors. The immediate goal, however, remains proving that blockchain can improve an already highly digitized Indian bond market without compromising investor protections.
