India Launches $627 Billion Corporate Bond Tokenization Project
SEBI's Demat 2.0 initiative modernizes bond markets with blockchain and digital rupee integration.
1Pilot Launch
India's securities regulator SEBI launched Demat 2.0, a blockchain-based system for corporate bond tokenization. The pilot connects to RBI's wholesale digital rupee via Unified Market Interface, enabling atomic settlements. Three companies have already issued tokenized bonds worth $115 million (10.25B INR) in this $627 billion market segment that represents 22.5% of India's total bond market.
2Technical Infrastructure
Demat 2.0 creates bonds as digital tokens in a distributed ledger maintained by market participants but owned by depositories. The system enables automatic interest payments and redemptions through smart contracts. All authorized institutions can instantly view ownership records, with CBDC wallets receiving digital rupee payments automatically on specified dates.
3Key Benefits
SEBI highlights six major advantages: same-day settlement for issuers (vs 2-3 days), potential cost reductions from automation, reduced manual reconciliations for intermediaries, elimination of settlement risk, instant secondary market settlements for investors, and automatic interest/redemption payments to CBDC wallets. The system maintains existing legal frameworks for credit ratings and disclosures.
4Initial Issuances
Three companies participated in the first phase: REC Limited raised $56M from 18 investors on Sept 7, L&T Limited secured $56M from four investors on Sept 9, and IIFL obtained $2.8M from one investor on Sept 9. All amounts were denominated in Indian rupees, with tokenized bonds stored on existing demat accounts after activating the Demat 2.0 feature.
5Implementation Roadmap
SEBI plans phased implementation: primary issuances first, followed by secondary trading via existing RFQ platforms, then retail investor access. No separate accounts or additional KYC are required. Investors need only activate Demat 2.0 with depositories and maintain wholesale CBDC rupee wallets with participating banks.
6Global Context
While other jurisdictions like Switzerland (Helvetia III), Hong Kong (Evergreen), and the US have tested bond tokenization, India's model uniquely issues corporate bonds directly on distributed ledgers from inception. State depositories record ownership, with central bank CBDC handling settlements within existing regulated infrastructure.
7Broader Tokenization Trend
Demat 2.0 coincides with India's wider asset tokenization push. Agritech firm Arya.ag is launching an Avalanche-based L1 network to tokenize $2B in grain assets and warehouse receipts, facilitating $1.3B in annual loans. This demonstrates India's strategic embrace of blockchain for capital markets and real assets.
8Market Transformation
The project represents a fundamental modernization of India's corporate bond market infrastructure. By combining blockchain efficiency with central bank digital currency, SEBI aims to enhance liquidity, reduce systemic risks, and position India as a leader in regulated financial market innovation. The $627B market size suggests significant scaling potential.
Original article: INCRYPTED — India Launches $627 Billion Corporate Bond Tokenization Project