India is bringing blockchain-based settlement into its conventional financial markets through a new pilot that combines tokenized corporate bonds with the central bank’s digital currency.
The Securities and Exchange Board of India (SEBI) launched Demat 2.0 this week, using the electronic accounts investors already rely on to hold stocks and bonds. Under the pilot, corporate debt can be issued in tokenized form on a distributed ledger operated by regulated market institutions.
REC, the state-owned power-sector lender, raised ₹500 crore, or about $56 million, through the system earlier this month. Larsen & Toubro then raised another ₹500 crore, while IIFL Finance secured ₹25 crore, worth approximately $2.8 million.
Tokenization does not change the underlying terms of the bonds. They continue to have fixed interest rates, defined maturity dates and the same investor rights. The key difference is in settlement, as the tokenized securities and the digital rupees used to purchase them can be transferred simultaneously.
Demat 2.0 connects the ledger for tokenized bonds to the Reserve Bank of India’s wholesale digital rupee through the Unified Market Interface. By linking the asset and payment legs of a transaction, the system is designed to reduce settlement risk.
Traditional bond transactions typically process securities and payments through separate systems. If one side of a transaction is completed while the other is delayed or fails, one party can be left exposed. The new setup allows both sides to settle together.
Smart contracts can also be used to automate corporate actions, including interest payments and redemptions. SEBI plans to expand the pilot in later stages, with secondary-market trading expected to be added before the system is eventually opened more broadly to retail investors.
The initiative reflects India’s approach to blockchain and digital assets. Although regulators have maintained a cautious stance toward privately issued cryptocurrencies, India is frequently ranked among the world’s largest crypto-adopting markets.
Rather than relying on open blockchain networks, regulators are incorporating tokenization into the country’s existing financial infrastructure. Banks, depositories, regulated market institutions and central-bank digital money remain central to the model.
Demat 2.0 therefore marks another step toward bringing blockchain technology into India’s established capital markets while keeping the issuance and settlement of tokenized assets within a regulated framework.
