India’s Securities and Exchange Board of India (SEBI) has launched the Demat 2.0 pilot, a program that lets corporate bonds be issued as digital tokens on distributed-ledger infrastructure and settled atomically with the Reserve Bank of India’s e-rupee. The regulator outlined the initiative in an official FAQ published this week, describing it as the next step in modernising India’s corporate debt market.
How Demat 2.0 turns bonds into native tokens
Under the pilot, a corporate bond is issued as a native digital token on a private, permissioned distributed ledger operated by India’s depositories. The token keeps the same ISIN, issuer obligations, coupon, maturity, covenants, rating and investor rights as a conventional bond, while the bond’s key terms are encoded into a smart contract. SEBI stressed that tokenization changes only the technology used to record ownership — it does not create a new asset class or dilute the existing securities framework — and the depository remains the authoritative record of beneficial ownership. Investors do not need to manage cryptographic keys, as depositories hold and manage private keys on their behalf.
Atomic settlement with the digital rupee
Issuers continue to use the existing electronic bidding platform for issuance, but on allotment the securities are credited to a Demat 2.0 account while the issuer receives proceeds in a central-bank digital currency wallet. SEBI said the securities and CBDC legs are linked on the ledger so they settle atomically — either both settle or neither does — removing the counterparty exposure that arises in the interval between trade and settlement. Coupon payments and redemptions can also be executed automatically through the smart contracts based on the holdings recorded on the ledger, while price discovery continues through existing exchange platforms rather than a separate tokenised venue.
A phased rollout under the regulatory sandbox
The pilot is being run under SEBI’s Regulatory Sandbox and is proposed to roll out in three stages, beginning with institutional issuance, followed by secondary-market trading and retail access, and eventually extending ledger nodes to other regulated entities. SEBI listed its objectives as testing atomic delivery-versus-payment, smart-contract-based servicing, and the resilience and auditability of the infrastructure. The launch adds to a broader push to modernize securities infrastructure, echoing moves elsewhere such as South Korea’s roadmap to tokenize securities issuance and circulation.
