Sebi Launches 'Demat 2.0' Pilot To Trade Tokenised Corporate Bonds On Blockchain-Style Ledger

The Securities and Exchange Board of India on Thursday launched a pilot project called Demat 2.0, testing a new way to issue, hold, trade and settle corporate bonds using distributed ledger technology, in a move regulators say could make India the first country to issue corporate bonds natively on such a system.

The initiative was jointly announced by Reserve Bank of India Governor Sanjay Malhotra and Sebi Chairman Tuhin Kanta Pandey at the Global Fintech Fest in Mumbai. Under Demat 2.0, a corporate bond is created as a digital token on a shared electronic ledger maintained simultaneously by India's market infrastructure institutions, rather than existing only in a conventional depository record. The ledger itself remains owned by the depositories, and Sebi was emphatic that the underlying legal character of the instrument does not change.

How The System Works

The pilot connects to the RBI's wholesale central bank digital currency, the digital rupee, through what the central bank calls its Unified Market Interface. That link is intended to enable what regulators describe as "atomic settlement," where the bond and the corresponding payment move simultaneously and instantaneously, rather than through the multi-step settlement cycles typical of conventional bond markets. Interest payments and redemptions can also be automated through smart contracts written directly into the ledger, cutting out manual processing steps that have historically made bond servicing slower and more error-prone.

Three companies have already tested the new infrastructure. Renewable energy financier REC issued the first tokenised bond on September 7, raising Rs 500 crore from 18 investors, followed by infrastructure major L&T, which raised an equal amount from four investors on September 9. Financial services firm IIFL raised a smaller Rs 25 crore tranche, taking total issuance under the pilot to just over Rs 1,025 crore.

Why Regulators Chose Corporate Bonds First

Sebi Chairman Tuhin Kanta Pandey explained the choice of corporate bonds as the pilot's starting point by pointing to the relative simplicity of the market: institutional-heavy participation, lower trading intensity than equities, and greater overall stability. He indicated that a secondary trading layer, allowing investors to buy and sell tokenised bonds they already hold, is currently being tested in a regulatory sandbox and will follow in a later phase, alongside eventual access for retail investors through existing request-for-quote platforms.

Importantly for existing bondholders, Sebi clarified that investors will not need to open any new account or complete fresh know-your-customer checks; tokenised bonds will simply sit within investors' existing demat accounts. Requirements around credit ratings, debenture trustees, listing rules and disclosure obligations continue to apply in full, the regulator said, explicitly ruling out any fragmentation of the market between tokenised and conventional bond issuances.

A Global First, With Global Company

Tokenisation of debt instruments has been trialled by individual issuers and platforms in several markets around the world, but Sebi said India is the first jurisdiction where corporate bonds are being issued natively on a distributed ledger with ownership records held by a country's own statutory depositories and the cash leg settled in central bank digital currency, all within existing regulated market infrastructure rather than a parallel private system.

Secondary-market infrastructure to support broader trading of these tokenised instruments is expected to be ready by December 2026, according to people familiar with the project, after which the pilot's next phases will determine how quickly the model scales beyond its initial institutional test cases.

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