India Begins Tokenizing Its $620 Billion Corporate Bond Market With Digital Rupee Settlements

SEBI’s Demat 2.0 trial converts corporate bonds into digital tokens and uses the RBI’s wholesale digital rupee for settlement, with secondary trading and retail participation planned for later stages.

— India has introduced Demat 2.0, a pilot that combines blockchain technology with the Reserve Bank of India’s wholesale digital rupee to issue and settle tokenized corporate bonds.

— REC, Larsen & Toubro and IIFL Finance have collectively raised ₹1,025 crore through the platform, while the bonds retain standard interest rates, maturity terms and investor rights.

— Pairing tokenized bonds with digital-rupee payments enables both sides of a transaction to settle simultaneously, reducing risk and creating a path toward automated corporate actions, secondary trading and eventual retail access.

India has begun using blockchain and central-bank digital currency to settle corporate bonds, extending tokenization further into the country’s established financial markets.

The Securities and Exchange Board of India launched Demat 2.0 this week. The pilot builds on the electronic accounts Indian investors already use for stocks and bonds, allowing corporate debt to be issued as digital tokens on a distributed ledger operated by regulated market institutions.

State-owned power-sector lender REC raised ₹500 crore, roughly $56 million, through the platform earlier this month. Engineering and construction leader Larsen & Toubro then added another ₹500 crore, while non-bank lender IIFL Finance secured ₹25 crore, or about $2.8 million.

Although the bonds remain traditional, with fixed interest rates, maturity dates and investor protections, the tokenized security and the digital rupees used to purchase it can now move in tandem rather than through separate settlement systems.

Demat 2.0 links the tokenized-bond ledger to the Reserve Bank of India’s wholesale digital rupee through its Unified Market Interface. This enables the bond and its payment to be transferred together, reducing settlement risk between counterparties.

Under a conventional settlement process, payment and delivery are coordinated across different systems. If one leg fails before the other is completed, one party may be left exposed; connecting the two allows both to settle at once.

Smart contracts can also manage corporate actions, including interest payments and redemptions. Later stages of the pilot are expected to add secondary-market trading and ultimately broaden participation to retail investors.

This strategy is notable in a country that has stayed wary of private cryptocurrencies, even as on-chain research firms frequently rank its population among the world’s leading crypto adopters.

Instead of directing investors toward open blockchain markets, Indian regulators are incorporating tokenization into the financial system they already oversee, with banks, depositories and central-bank money at its core.

Tokenized equities are driving RWA inflows as the market rebounds, with Binance’s bStocks reaching about $118.5 million in two months to become the second-largest issuer and represent roughly 90% of on-chain equity DEX volume.

Why this matters:

Tokenized equities are driving RWA inflows as the market rebounds, with Binance’s bStocks reaching about $118.5 million in two months to become the second-largest issuer and represent roughly 90% of on-chain equity DEX volume.