India’s Regulator Launches Demat 2.0 Pilot With Over $100 Million in Tokenized Bonds
Three issuers raise $107 million in digital bonds
The Securities and Exchange Board of India (SEBI) announced on Thursday that three companies raised ₹1,025 crore ($107.2 million) through tokenized corporate bonds. This took place under the "Demat 2.0" pilot program, which uses distributed ledger technology—a digital system for recording transactions across multiple locations.
The regulator stated that the new system allows for the issuance, holding, and settlement of corporate bonds on a digital ledger owned by depositories. This infrastructure aims to modernize the existing process for handling securities.
Key details of the bond issuance
- Three issuers raised a total of $107.2 million through the new system.
- The process uses the central bank's digital currency (CBDC) for settlement.
- Issuers can access proceeds on the same day as bidding, rather than waiting the usual two to three days.
- The system utilizes "atomic settlement," meaning the bond and the payment are exchanged at the same time.
How the technology facilitates settlement
According to SEBI, the infrastructure connects to the Reserve Bank of India’s (RBI) wholesale CBDC, which is a digital version of the country's official currency used by financial institutions. This connection is made through the central bank’s Unified Market Interface.
REC Ltd. was the first company to use the system on September 7, raising $52.3 million from 18 investors. On September 9, L&T Ltd. raised $52.3 million from four investors, while IIFL raised $2.6 million from a single investor on the same day.
What is confirmed about the tokenized bonds
SEBI clarified that these tokenized bonds are not a separate class of securities. They carry the same obligations, interest rates, maturity dates, and investor rights as traditional dematerialized bonds. All authorized institutions can see bondholder details on the shared ledger simultaneously, and payments are delivered directly to CBDC wallets on due dates.
Why this development matters for efficiency
The regulator expects these features to make the issuance and servicing of corporate bonds faster and more efficient. By automating parts of the process on a shared ledger, the system is intended to be less prone to errors and reduces the risks often found when securities and funds are transferred separately.
Planned stages for the pilot program
The pilot is being conducted in three stages. The current first phase is focused on issuance by institutions. SEBI plans to introduce secondary trading and access for retail investors in later phases under its Regulatory Sandbox, a controlled environment for testing new financial products.
