India's Demat 2.0 Puts Corporate Bonds on the Blockchain

India has launched Demat 2.0, a pilot infrastructure for issuing and trading corporate bonds as digital tokens. This system is integrated directly into the country's existing regulated securities market. Unlike many tokenization experiments built on standalone blockchain platforms, this approach allows corporate bonds to be created natively on a distributed ledger maintained by market infrastructure institutions.

The system is connected to the RBI's wholesale digital rupee through its Unified Market Interface, which allows for atomic delivery-versus-payment settlement. This eliminates the period previously needed when one party has transferred an asset while still waiting for the other side to complete the payment.

Three companies have already issued tokenized bonds worth a total of ₹1,025 crore (or $116 million). REC Limited led the charge, becoming the first issuer on September 7, raising ₹500 crore from 18 investors. Larsen & Toubro followed suit with the same amount from four investors, while IIFL raised ₹25 crore from a single investor on September 9.

The rollout of this system will come in three stages, starting with institutional corporate bond issuance. The second stage will introduce secondary-market trading and expand access to retail investors, while the last one could bring additional regulated entities onto the network and explore tokenization of other financial instruments.