India to pilot tokenized corporate bonds using digital rupee in September

India tests blockchain-based bonds with digital rupee payments

India is set to launch its first pilot for tokenized corporate bonds in September. The bonds will be issued by REC Limited, a state-owned company that finances power infrastructure projects. Payments for these bonds will use India’s wholesale central bank digital currency (CBDC), a digital version of the rupee issued by the Reserve Bank of India (RBI).

The pilot will initially be limited to a small group of investors. It may be announced at a financial technology event in Mumbai in September.

Key details of the pilot

• The bonds will be worth less than 5 billion Indian rupees, about $57 million.
• Investors will need two digital accounts: a wholesale CBDC wallet from a bank and a new electronic securities wallet called DEMAT 2.0.
• The bonds will have a three-month lockup period, meaning investors cannot sell them during that time.
• A secondary market for trading these bonds is expected to be developed by December.

How the bonds and payments will work

The tokenized bonds will be recorded using distributed ledger technology, often called blockchain. This is a digital system that keeps records across many computers to make transactions more secure and transparent.

Investors will use the digital rupee, a form of CBDC, to buy the bonds. The RBI and the Securities and Exchange Board of India (SEBI), the country’s markets regulator, are working together on this project.

What is confirmed

• REC Limited will issue tokenized corporate bonds in September.
• The bonds will be settled using India’s wholesale CBDC.
• The RBI and SEBI are collaborating on the initiative.
• The bonds will have a three-month lockup period.
• A secondary market is planned for December.

What is still unclear

• The exact date of the pilot launch in September has not been announced.
• The identities of the select group of investors have not been disclosed.
• No official statements have been released by the RBI, SEBI, or REC Limited confirming the details.

Why this pilot matters

This pilot could help India explore how blockchain technology and digital currencies can make bond markets more efficient. If successful, it may lead to broader use of tokenized assets and CBDCs in the country’s financial system.

Sources

• Cointelegraph
• Reuters