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India just took its biggest step yet toward putting real financial infrastructure on a blockchain — and it did it without touching investor protections or existing accounts.
The Securities and Exchange Board of India, working alongside the Reserve Bank of India, launched a pilot program called Demat 2.0 this week, letting companies issue and hold corporate bonds as digital tokens. Three issuers have already used the system to raise a combined 10.25 billion rupees, roughly $107 million, in the pilot’s opening days.
How the System Works
Demat 2.0 runs on a distributed ledger controlled by India’s statutory depositories — the same institutions that already handle traditional securities records. What makes it different is the link to the RBI’s wholesale central bank digital currency through something called the Unified Market Interface. That connection lets bond payments and bond ownership move together instantly, a feature regulators are calling atomic settlement. In practice, that means issuers get their money the same day investors bid, instead of waiting two to three days like they would under the current system.
Smart contracts also handle interest payments and bond redemptions automatically, cutting out manual processing steps that typically slow settlement down.
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Three Issuers, One Pilot
Public-sector lender REC opened the pilot on Monday, raising 5 billion rupees from 18 investors. Two days later, engineering firm Larsen & Toubro matched that figure, pulling in 5 billion rupees from just four investors. Non-bank lender IIFL rounded things out with a smaller 250 million rupee issuance to a single investor.
That total is notably larger than what was originally floated. Reports in August suggested India was planning a test run involving REC alone, for less than 5 billion rupees. The actual rollout more than doubled that scope and added two more issuers along the way.
What’s Next — and What Isn’t Changing
SEBI says later phases will introduce secondary trading through existing request-for-quote platforms and eventually open the system to retail investors, with lessons from this pilot shaping how that expansion happens. For now, investors don’t need a new account to participate — their existing Demat account works, though they’ll need to activate Demat 2.0 through their depository and hold a wholesale CBDC wallet with a participating bank to settle trades.
Importantly, SEBI was clear that tokenization is a technical upgrade, not a legal one. The bonds carry the same legal status, repayment terms, and investor protections as before.
The regulator also claims a first: combining natively-issued blockchain bonds, depository-based ownership records, and CBDC settlement within an already-regulated market — something it says no other country has done at this scale.
Whether this becomes India’s blueprint for broader market tokenization will depend on how the rest of the pilot plays out.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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