SEBI Launches 'Demat 2.0' Pilot For Tokenised Corporate Bonds

The Securities and Exchange Board of India (SEBI) has announced the successful launch of the “Demat 2.0” pilot for tokenised corporate bonds, which uses Distributed Ledger Technology for their issuance, holding, trading and settlement.

Under the pilot, corporate bonds are issued as digital tokens on a shared ledger maintained by the market infrastructure institutions. The system is linked to the Reserve Bank of India's wholesale Central Bank Digital Currency e₹ through the Unified Market Interface, allowing the bond and payment to be settled simultaneously. Smart contracts can also automate interest and redemption payments.

SEBI said the initiative would allow issuers to receive funds on the same day, lower issuance and servicing costs, reduce manual work and reconciliation, eliminate settlement risk and enable investors to receive funds immediately in secondary market transactions.

The pilot has so far recorded three issuances totalling ₹1,025 crore, with REC Limited raising ₹500 crore, L&T Limited ₹500 crore and IIFL ₹25 crore.

“The pilot is being taken forward in phases. Issuances under the first phase are ongoing. Later phases will extend to buying and selling these bonds through the existing RFQ platforms, and to access for retail investors. The experience gained will guide any wider rollout.” the press release stated

The regulator clarified that tokenisation does not alter the legal nature of the bonds or the rights and obligations of issuers and investors, while existing requirements relating to credit rating, debenture trustees, listing and disclosures will continue to apply.