Three companies have sold ₹1,025 crore ($107.2 million) of corporate bonds as digital tokens in the first phase of Demat 2.0, a regulator-led pilot in India.

The project represents the first live test of issuing and settling Indian corporate debt on a shared digital ledger while remaining within the country’s existing market infrastructure. The Securities and Exchange Board of India (SEBI) has described India as “the first country” to launch a project of this kind.

How the Demat 2.0 pilot works

Under the system, corporate bonds are issued, held and settled as digital tokens on a distributed ledger owned by India’s two statutory depositories, the National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL).

The cash leg of each transaction is settled using the Reserve Bank of India’s wholesale central bank digital currency, known as the e₹-W. The bond and payment are connected through the RBI’s Unified Market Interface.

SEBI disclosed the results after the first stage of the pilot was completed on Thursday. State-owned power financier REC Ltd. conducted the first issue on September 7, raising ₹500 crore ($52.3 million) from 18 investors. The bond carried a 7.3% coupon and attracted bids totaling ₹7.96 billion ($83.2 million), substantially exceeding the ₹5 billion ($52.3 million) that REC sought to raise.

Engineering company Larsen & Toubro issued another ₹500 crore of bonds two days later, with four investors participating. Non-bank lender IIFL completed the first group of offerings on the same day, selling ₹25 crore ($2.6 million) to a single buyer.

Together, the three companies raised ₹1,025 crore ($107.2 million) through tokenized corporate bonds.

According to SEBI, issuers can receive proceeds on the same day that bids are made, instead of waiting the usual two to three days. Smart contracts can also automatically transfer coupon and redemption payments to bondholders’ e₹ wallets when those payments become due.

The first stage’s institutional-only scope means the pilot has so far focused on issuance and settlement rather than secondary-market trading or wider investor access. Those functions are reserved for the next stages, which will test trading through existing exchange RFQ and OTC reporting systems and add network nodes for credit rating agencies and other regulated participants.

Account and legal requirements

A 24-question FAQ published by SEBI states that the Demat 2.0 network is private and operated entirely by the depositories, which hold and manage users’ keys. Investors do not need to open separate accounts or complete new Know Your Customer checks. Instead, a Demat 2.0 account is attached to an investor’s existing demat account and linked to a digital-rupee wallet opened with the investor’s bank.

Issuers only need a central bank digital currency wallet linked to a designated bank account to receive bond proceeds and make payments.

SEBI has clarified that tokenized bonds remain securities under the Securities Contracts (Regulation) Act, 1956. The depository also continues to serve as the official record of ownership under the Depositories Act, 1996. The regulator said a separate credit rating is not required for the ledger because the issuer’s obligations and cash flows remain unchanged.

The pilot is being conducted in three stages under SEBI’s Regulatory Sandbox. The first stage is limited to institutional issuance. The second will introduce secondary trading through exchanges’ existing request-for-quote (RFQ) and over-the-counter (OTC) reporting systems, rather than through a new trading venue. The final stage would extend network nodes to credit rating agencies and other regulated participants.

Source: Cryptopolitan. SEBI FAQ: Related reporting: