India is taking another step toward blockchain-based finance by using tokenized corporate bonds alongside the central bank’s digital currency for settlement.
The Securities and Exchange Board of India (SEBI) launched its Demat 2.0 pilot this week, building the system around the electronic accounts investors already use to hold securities. The initiative allows corporate bonds to be represented as digital tokens on a distributed ledger managed by regulated market institutions.
REC, a state-owned power-sector lender, raised ₹500 crore, or around $56 million, through the platform earlier this month. Larsen & Toubro also raised ₹500 crore, while IIFL Finance secured ₹25 crore, worth approximately $2.8 million.
The bonds retain their conventional characteristics, including fixed interest rates, maturity dates and investor rights. The main change is how transactions are settled. Under the new system, tokenized bonds and the digital rupees used to purchase them can be transferred at the same time.
Demat 2.0 connects the tokenized securities ledger with the Reserve Bank of India’s wholesale digital rupee through the Unified Market Interface. This setup allows the payment and asset sides of a transaction to settle together, potentially reducing settlement risk.
In traditional markets, payments and securities are generally processed through separate systems. A delay or failure on one side can leave the other party exposed. Coordinating both sides through a shared digital infrastructure is designed to minimize that risk.
Smart contracts can also automate certain corporate actions, including interest payments and redemptions. Later stages of the pilot are expected to introduce secondary-market trading, followed by broader access for retail investors.
The initiative reflects India’s distinct approach to blockchain technology. While the country has maintained a cautious stance toward privately issued cryptocurrencies, research firms continue to rank India among the world’s leading crypto-adoption markets.
Instead of moving financial activity onto open blockchain networks, Indian regulators are integrating tokenization into the existing financial system. Banks, depositories, regulated institutions and central-bank digital currency remain at the center of the framework.
Demat 2.0 could therefore help bring blockchain-based settlement into India’s established capital markets while maintaining regulatory oversight over the issuance and trading of tokenized financial assets.
