India’s securities market regulator launched distributed ledger technology (DLT) infrastructure for the issuance, custody, and settlement of tokenized corporate bonds. As part of the pilot, 10.25 billion rupees (~$107 million) in debt securities were issued through the new infrastructure.
The Securities and Exchange Board of India (SEBI) announced the successful launch of Demat 2.0, a DLT-based infrastructure that combines corporate bond issuance on a distributed ledger, ownership records maintained through official depositories, and settlement using the Reserve Bank of India’s (RBI) wholesale digital rupee (CBDC). The system is integrated with the existing regulated securities market infrastructure.
Under Demat 2.0, corporate bonds are created directly on a distributed ledger as digital tokens. The ledger itself is owned by the depositories, and its data is synchronized among market infrastructure participants. Integration with the wholesale CBDC is provided through RBI’s Unified Market Interface (UMI), enabling atomic settlement.
As part of the pilot project, the new infrastructure was used for 3 corporate bond issuances totaling 10.25 billion rupees (~$107 million). The bonds issued through Demat 2.0 included:
- REC Limited, an Indian state-owned nonbank financial company (NBFC) specializing in energy sector financing, raised 5 billion rupees (~$52.3 million) from 18 investors;
- L&T Limited, an Indian multinational engineering and industrial conglomerate, also raised 5 billion rupees (~$52.3 million) from 4 investors;
- IIFL, a private nonbank financial company, raised 250 million rupees (~$2.6 million) from 1 investor.
According to SEBI, Demat 2.0 enables tokenized bond settlement on the trade date instead of the traditional 2 to 3 days. With atomic settlement, securities and funds are transferred simultaneously, eliminating settlement risk. Process automation also reduces costs for issuers and cuts the amount of manual work performed by intermediaries.
Demat 2.0 also automates bond servicing through smart contracts. Currently, issuers making interest or redemption payments need to obtain bondholder data and process payments separately through the banking system. Under Demat 2.0, these transactions are executed automatically, with digital rupees transferred directly to investors’ CBDC wallets on the scheduled date.
SEBI also said Demat 2.0 remains in pilot mode, with tokenized bond issuances continuing during the first phase. In subsequent phases, the regulator plans to test secondary market trading and then provide access to retail investors. The results of the pilot will be used to determine whether the system should be scaled further.
The regulator also emphasized that the transition to DLT doesn’t change the legal nature of corporate bonds, issuers’ obligations, or investors’ rights. Requirements covering credit ratings, listing, disclosures, and other regulatory aspects remain unchanged.
Testing of Demat 2.0 was first reported in late August.
