India Launches Tokenized Bond Pilot for Institutions

The Securities and Exchange Board of India has officially kicked off a pilot program for tokenized corporate bonds. The project, known as Demat 2.0, recently completed three major issuances from REC Limited, L&T Limited, and IIFL. These initial transactions moved over 1,000 crore rupees through a private, permissioned ledger system.

The system links the bond itself to a digital token, while payments are settled using the central bank's digital rupee. This setup allows for atomic delivery versus payment, meaning the bond and the cash change hands at the exact same time. This synchronization eliminates the typical waiting period between sending funds and receiving the security, reducing risk for all parties involved.

While the technology is new, the legal structure remains familiar. The tokens carry the same identifiers, maturity terms, and investor rights as traditional bonds. India’s depositories manage the private keys, which keeps the existing custody model intact and avoids the need for individual investors to handle their own digital wallets during this phase.

This first stage focuses solely on institutional issuance. The regulator plans to introduce secondary market trading and retail access in a future stage. For now, the market is watching to see how this architecture performs when it eventually opens up to a wider group of investors and more frequent trading activity.