India Targets $620B Corporate Bond Market With Tokenized Assets, Digital Rupee Settlement

India is bringing blockchain-based settlement into its traditional financial markets through a new pilot that combines tokenized corporate bonds with the Reserve Bank of India’s digital currency.

The Securities and Exchange Board of India (SEBI) launched Demat 2.0 this week, building the system around the electronic accounts investors already use to hold stocks and bonds. The pilot allows corporate bonds to be issued as digital tokens on a distributed ledger operated by regulated market institutions.

REC, the state-owned power-sector lender, raised ₹500 crore, or roughly $56 million, through the system earlier this month. Larsen & Toubro followed with another ₹500 crore, while non-bank lender IIFL Finance raised ₹25 crore, equivalent to about $2.8 million.

The tokenization process does not change the bonds’ underlying terms. They continue to carry fixed interest rates, maturity dates and standard investor rights. Instead, the key change is that the tokenized bond and the digital rupees used to purchase it can be transferred together.

Demat 2.0 connects the ledger containing the tokenized bonds with the RBI’s wholesale digital rupee through the Unified Market Interface. By linking the asset and payment legs, the system can allow both sides of a transaction to settle simultaneously and reduce settlement risk.

In a conventional transaction, securities and payments move through separate settlement systems. If one side is delayed or fails before the other is completed, the other party can face exposure. Coordinating both legs through the same digital framework is designed to reduce that risk.

Smart contracts can also be used to automate corporate actions, including interest payments and redemptions. Later phases of the pilot are expected to add secondary-market trading and eventually expand the system to retail investors.

The move highlights India’s approach to blockchain technology and digital assets. While regulators have maintained a cautious position toward private cryptocurrencies, India is frequently ranked among the world’s largest crypto-adoption markets.

Rather than moving financial activity onto open blockchain networks, Indian regulators are integrating tokenization into the existing financial system. Banks, depositories, regulated market institutions and central-bank digital money remain at the center of the framework.

Demat 2.0 therefore represents a step toward bringing blockchain-based securities settlement into India’s established capital markets while keeping tokenized assets within a regulated financial infrastructure.