- India’s Demat 2.0 tests blockchain settlement in its $620B corporate bond market.
- The digital rupee links bond transfers and payments to reduce settlement risk.
- Demat 2.0 plans secondary trading and retail access in its second rollout stage.
India is testing whether blockchain and the digital rupee can make settlement faster, reduce processing costs and improve transparency in its roughly $620 billion corporate bond market. Through the Demat 2.0 pilot, SEBI and the Reserve Bank of India are connecting tokenized securities with central-bank money while preserving existing investor rights.
REC, L&T and IIFL have issued a combined ₹1,025 crore in bonds under the program. The pilot examines whether shared records and automated servicing can reduce manual processing and reconciliation between institutions.
How the Corporate Bond Market Pilot Works
Under Demat 2.0, issuers create corporate bonds as native digital tokens on a private, permissioned distributed ledger. Depositories retain their role as the authoritative record keepers, while smart contracts encode coupon rates, payment dates, and redemption terms.
Issuance continues through existing electronic bidding platforms. Investors receive tokens through an extension of their existing demat accounts, using their current KYC records. Depositories also manage private keys, allowing investors to access holdings through familiar interfaces without maintaining blockchain infrastructure.
Digital Rupee Links Bonds and Payments
The RBI’s wholesale digital rupee supplies the payment leg through atomic delivery-versus-payment. This mechanism links the bond transfer and payment so that both settle together or neither settles. That arrangement addresses the risk of delivering securities without receiving payment. It does not remove issuer credit risk or other investment risks.
Alongside near-instant settlement, the pilot tests automated coupon payments and redemptions. Shared transaction records aim to improve auditability and traceability while reducing the need for repeated operational instructions.
Testing a Route to Wider Tokenization
For India’s digital-asset ecosystem, Demat 2.0 places tokenization within existing securities rules and regulated infrastructure. Tokenized bonds retain their legal character, issuer obligations, and investor protections.
The rollout starts with issuance and asset servicing, initially targeting institutions. Its second stage envisages secondary trading and retail access through existing market channels.
A third stage could extend network access to other regulated entities and consider additional instruments. Broader adoption depends on testing cybersecurity, scalability, resilience, and settlement finality before regulators consider a wider framework.
Related: India is Tokenizing Grain on Avalanche: Could This Change Commodities Trading
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
