India Launches Tokenized Bond Pilot with $107M Issued

Launch of Demat 2.0 and First Tokenized Bond Issuances

India’s Securities and Exchange Board (SEBI) announced the launch of Demat 2.0, a platform that enables issuance and holding of corporate bonds as digital tokens on a distributed ledger maintained by the country’s statutory depositories. The system is integrated with the Reserve Bank of India’s wholesale central bank digital currency (CBDC) via the Unified Market Interface.

The first bond issuance under this pilot was conducted by the public-sector lender REC, raising 5 billion rupees from 18 investors. By Wednesday, engineering conglomerate Larsen & Toubro (L&T) issued another 5 billion rupees from four investors, and non-bank lender IIFL issued 250 million rupees worth of bonds to a single investor.

Benefits of Tokenized Bonds and Atomic Settlement Technology

SEBI emphasized that the Demat 2.0 infrastructure allows issuers to receive funds on the same day of bidding instead of the conventional two to three-day delay. This is achieved through atomic settlement mechanisms which remove the time gap between money and bond transfers.

Moreover, smart contracts can automate interest payments and redemption processes, enhancing efficiency and transparency in secondary market operations.

Expansion of Pilot and Future Phases

Originally, the pilot involved an REC bond issuance of under 5 billion rupees limited to select investors, as reported by Reuters in August. However, the pilot expanded to include two additional issuers, more than doubling the initially expected issuance volume from REC alone.

SEBI noted that the first phase issuances are still ongoing, and upcoming stages will introduce secondary trading through existing request-for-quote platforms and allow access to retail investors. Experience gathered from the pilot will inform any wider deployment.

Investor Conditions and Legal Status of Tokenized Bonds

Investors can hold tokenized bonds in their existing Demat accounts without opening separate accounts or completing new KYC procedures. Still, participants must enable Demat 2.0 through their depository and maintain a wholesale CBDC wallet with a partnering bank for payment settlements.

SEBI stated that India is the first country to combine bonds issued natively on a distributed ledger, ownership records maintained by statutory depositories, and settlements in CBDCs within an existing regulated market infrastructure.

The regulator also confirmed that tokenization does not alter the legal status of bonds, repayment obligations, or investor protections.