The Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI) havelaunched Demat 2.0, a pilot testing the issuance, holding, trading and settlement of corporate bonds as digital tokens on a distributed ledger. The infrastructure connects to the RBIs wholesalecentral bank digital currency(CBDC) through its Unified Market Interface, enabling the bond and payment to settle simultaneously.

The pilot uses distributed ledger technology to record bond ownership and smart contracts to automate asset servicing, including interest and redemption payments. SEBI said this could shorten settlement times, reduce manual processes, reconciliation and validation, and lower issuance and servicing costs, while atomic settlement removes settlement risk.

Three issuers have so far issued tokenised bonds worth a combined 1,025 crore. The pilot is being rolled out in phases, with later stages expected to extend to secondary-market trading and retail investor access.

SEBI said the initiative changes the technology used to record ownership and service bonds but does not alter their legal status or investor protections. Credit-rating, disclosure, listing and debenture-trustee requirements remain in place, while tokenised bonds continue to be held through existing demat accounts.

Why does it matter?

Tokenisation could gradually change the infrastructure on which capital markets operate, rather than simply making existing processes more efficient. As more financial assets move onto shared digital infrastructure, questions around interoperability, governance and the role of central banks are likely to become increasingly important. Indias pilot provides a useful example of how established financial systems can test new technology while preserving the institutional structures that underpin market confidence.

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