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India launches Demat 2.0 pilot, tokenizing corporate bonds with instant digital rupee settlement

India launches Demat 2.0 pilot, tokenizing corporate bonds with instant digital rupee settlement

New Capabilities

Three issuers raised ₹1,025 crore in phase one; secondary-market trading and retail access come next

2 days ago: SEBI and RBI launch Demat 2.0 at Global Fintech Fest

Overview

Updated Yesterday

Three Indian companies raised ₹1,025 crore in corporate bonds that exist as digital tokens on a shared ledger, with the cash leg settled instantly in the Reserve Bank of India's digital rupee. India is the first country to issue bonds natively on a distributed ledger while keeping formal ownership records with its statutory depositories.

The pilot, called Demat 2.0, replaces the usual two-to-three-day settlement cycle with atomic settlement: bond and money move together or not at all. But there is no secondary market yet — the bonds are listed on exchanges with no live trading venue — so the mechanism remains untested under real trading pressure.

SEBI chairman Tuhin Kanta Pandey said the next phase brings secondary-market trading, with retail access and other instruments after that. If it scales, tokenized bonds could cut issuance and servicing costs and automate interest payments through smart contracts.

Why it matters

If this pilot scales, corporate bond settlement in India drops from days to instant, simultaneous transfer — eliminating the window where trades can fail.

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Key Indicators

₹1,025 crore
Tokenized bond issuance, phase one
REC, L&T, and IIFL raised this total from 23 institutional investors in the first three issuances.
3
Issuers in pilot phase one
SEBI chairman confirmed three issuers completed in the first phase of the Demat 2.0 pilot.
23
Institutional investors participating
18 investors took REC's paper, 4 took L&T's, and a single investor took IIFL's issuance.
0
Live secondary trading venues
No exchange yet offers a two-way market for tokenized bonds; industry reports target one by December 2026.

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People Involved

Organizations Involved

Timeline

3 events Latest: 2 days ago
  1. SEBI and RBI launch Demat 2.0 at Global Fintech Fest

    Latest Announcement

    Regulators confirmed phase one success with ₹1,025 crore raised. Pandey said secondary trading is next.

  2. L&T and IIFL issue tokenized bonds

    L&T raised ₹500 crore from four investors; IIFL raised ₹25 crore from one.

  3. REC issues India's first tokenized corporate bond

    Issuance

    The state-owned power financier raised ₹500 crore from 18 investors in the first Demat 2.0 issuance.

Scenarios

1

Exchanges launch secondary trading for tokenized bonds by early 2027

Possible Resolves by Q1 2027

Discussed by: SEBI Chairman Tuhin Kanta Pandey confirmed secondary trading is the next phase; Reuters-sourced industry reports target a venue by December 2026

BSE and NSE build a two-way market for Demat 2.0 bonds on existing RFQ platforms. A live market would test atomic settlement under real trading pressure and show whether tokenization delivers pricing benefits, which the pilot has not yet demonstrated. The reported three-month lock-in on issued notes would expire first.

2

Retail investors enter Demat 2.0 as the pilot moves to Stage II

Possible Resolves by Q2 2027

Discussed by: SEBI's official pilot roadmap and FAQ

SEBI extends the pilot beyond institutional investors to retail participants, who would enable Demat 2.0 with their depository and hold a wholesale CBDC wallet with a participating bank. An interim peer-to-peer transfer mechanism may operate before this stage to provide liquidity for tokenized bonds.

3

Demat 2.0 spreads to new instruments and institutions

Unlikely Resolves by End of 2027

Discussed by: SEBI pilot Stage III plan

SEBI extends the shared ledger to credit rating agencies, depository participants, and other regulated entities, and considers additional instrument classes beyond corporate bonds plus a wider range of corporate actions. This would move tokenized issuance from a bond-market experiment toward general-purpose market infrastructure.

4

Demat 2.0 stays a controlled experiment through 2027

Possible Resolves by End of 2027

Discussed by: Industry executives at the Global Fintech Fest, as reported by The Crypto Times

Open issues — legal certainty, data privacy, consent management, interoperability, platform concentration, and the stability risks of money moving faster than existing safeguards can handle — keep the pilot confined. The ₹1,025 crore raised so far remains the ceiling, and SEBI announces no wider rollout.

Historical Context

3 moments from history that rhyme with this story — and how they unfolded.

1996–2005

India's dematerialization rollout (1996–2005)

India began moving stock ownership from physical paper certificates to electronic demat accounts in 1996, creating depositories NSDL and CDSL to hold records. The shift took nearly a decade and required a national campaign because brokers and investors distrusted electronic records.

Then

Trading halts and conversion backlogs as firms switched certificates in batches.

Now

Virtually all Indian securities now exist in demat form, and the two depositories are core national infrastructure.

Why this matters now

Demat 2.0 repeats the pattern — same depositories, same accounts, new recording technology, phased rollout — after India's first dematerialization took ten years to complete.

August 2018

World Bank bond-i (2018)

The World Bank raised A$110 million on a private Ethereum-based ledger, the first bond issued directly on a distributed ledger. It proved issuance could work, but the cash leg settled through traditional banking channels.

Then

Several banks and governments ran similar pilots over the following years.

Now

Most stayed experiments because settlement still relied on conventional rails and legal ambiguity remained.

Why this matters now

India's Demat 2.0 goes further by settling the cash leg in central bank digital currency and keeping ownership with statutory depositories, so it runs inside regulated market infrastructure rather than beside it.

May 2024

US securities industry moves to T+1 settlement (2024)

After the 2021 meme-stock frenzy exposed settlement risk, the US cut the trade settlement cycle from two business days to one. The Securities and Exchange Commission said the shorter window reduced counterparty and liquidity risk.

Then

T+1 shortened the risk window across US equities and corporate bonds.

Now

Regulators continue discussing same-day or instant settlement as the eventual endpoint.

Why this matters now

Atomic settlement in Demat 2.0 removes the window entirely — bond and cash move together or not at all — the endpoint of a decades-long drive to shorten settlement cycles.

Sources

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