India Prepares Tokenized Bond Pilot Using Wholesale CBDC

India is set to pilot tokenized corporate bonds in September, marking an important step towards integrating blockchain technology into its financial system. The initiative will see REC Limited issue under $57 million worth of tokenized bonds, which will be settled using the country's central bank digital currency (CBDC). This is a significant development as it aims to reduce settlement friction by bringing securities settlement and payment settlement into a more unified flow.

The pilot will use two separate digital accounts: a wholesale CBDC wallet and a dedicated electronic securities wallet. This is in contrast to earlier tokenized asset experiments, which often relied on traditional payment and settlement mechanisms for transfers. The project, known as DEMAT 2.0, aims to record bond holdings using distributed ledger technology.

The pilot will initially be open only to a select group of investors and will have an initial three-month lockup period. After that, exchanges are expected to develop a secondary market for the tokenized bonds by December. The project's intent is to move beyond issuance-only pilots and create a more liquid market.