Highlights
- India's central bank and securities regulator have launched a blockchain pilot to tokenize the country's roughly $620 billion corporate bond market.
- The program, dubbed Demat 2.0, settles trades using the RBI's wholesale digital rupee, allowing bond delivery and payment to happen simultaneously on-chain.
- REC, Larsen & Toubro and IIFL Finance have already raised a combined ₹1,025 crore (about $123 million) through the new system.
- Indian exchanges are targeting a secondary market for the tokenized bonds by December 2026, with retail access expected in a later phase.
India's central bank, the Reserve Bank of India, and its securities regulator, SEBI, have launched a pilot program to bring the country's roughly $620 billion corporate bond market onto a blockchain-based settlement system, according to CoinDesk. The initiative, called Demat 2.0, issues tokenized versions of corporate bonds and settles trades using the RBI's wholesale central bank digital currency, the digital rupee, rather than the conventional multi-day settlement process. Three issuers — REC, Larsen & Toubro and IIFL Finance — have already raised a combined ₹1,025 crore, or roughly $123 million, through the system, with the bonds otherwise retaining their standard interest rates, maturity dates and investor rights.
How Demat 2.0 Actually Settles a Trade
The technical appeal of the design is atomic settlement: because both the bond token and the digital-rupee payment move on the same underlying ledger, a trade's delivery and payment legs can be linked so that one cannot happen without the other, eliminating the settlement risk that exists in conventional bond markets where securities and cash move through separate systems on different timelines. That same infrastructure is designed to handle corporate actions automatically — interest payments and bond redemptions can be executed through smart contracts rather than requiring manual processing by a registrar or custodian, cutting down on both the cost and the operational risk of servicing a bond after it's issued.
Related: Tokenized Equity Trading Hits Record as Volume Surges 800% YTD
For now, the pilot covers only issuance and initial settlement; a functioning secondary market — where investors could actually trade the tokenized bonds among themselves rather than holding them to maturity — is targeted for December 2026, and full retail access is expected to come only in a later phase after that. India's approach echoes similar central-bank-digital-currency-linked settlement experiments underway elsewhere, but the scale of the target market sets it apart: at $620 billion, India's corporate bond market dwarfs most other jurisdictions' tokenization pilots to date, and even a modest share of that market moving onto the new rails would represent one of the largest real-world-asset tokenization efforts attempted by any government to date.
Part of a Bigger Institutional Tokenization Wave
India's pilot lands squarely within a broader institutional push to move traditional financial instruments onto blockchain rails, a trend that has accelerated well beyond crypto-native assets over the past year. In the U.S., the Depository Trust & Clearing Corporation has moved to tokenize Russell 1000 stocks including Nvidia and Apple starting in October, while asset managers like Franklin Templeton have already won regulatory clearance to put tokenized fund shares directly into their products. Banks, meanwhile, have been building out tokenized-deposit rails of their own, following the model set by cross-border settlement pilots like the one run by DBS and Citi on Swift's network. India's entry into this space is notable because it comes with direct central-bank backing through the digital rupee rather than through a private consortium or a single bank's proprietary system, giving the pilot a level of official sovereign-currency settlement finality that most corporate tokenization efforts elsewhere lack.
For crypto markets specifically, government-led tokenization pilots like this one matter less for immediate price action than for the longer-run legitimization of blockchain rails as genuine financial infrastructure rather than a speculative side market. Every large, credible institution or government that builds real settlement volume on programmable ledgers — even ones using permissioned, CBDC-based systems rather than public crypto networks — reinforces the underlying thesis that tokenization is a durable shift in how capital markets operate, not a passing narrative.
What's Next
The next concrete milestone is the push toward a working secondary market by December 2026, when investors would be able to actually trade the tokenized bonds rather than simply hold them from issuance to maturity — a much harder technical and regulatory problem than the initial settlement pilot just completed. Also worth watching is whether other Indian issuers follow REC, Larsen & Toubro and IIFL Finance onto the platform, and how quickly the RBI expands digital-rupee settlement capacity to support a meaningfully larger share of the $620 billion market. If the pilot scales as planned, India would have one of the most credible government-backed real-world-asset tokenization programs anywhere, at a scale few other jurisdictions have yet attempted.
FAQ
What is Demat 2.0?
Demat 2.0 is the name of India's new pilot program that lets corporate bonds be issued and settled as blockchain-based tokens, with payment made using the RBI's wholesale digital rupee.
How large is India's corporate bond market?
India's corporate bond market is valued at roughly $620 billion, and the tokenization pilot is intended to eventually bring a meaningful share of that market onto blockchain-based settlement.
Who has already used the new system?
REC, Larsen & Toubro and IIFL Finance have raised a combined ₹1,025 crore, or about $123 million, through tokenized bonds settled via the pilot.
When will investors be able to trade these tokenized bonds?
A secondary market is targeted for December 2026; broader retail investor access is expected only in a later phase after that.
