Sebi launches Demat 2.0 pilot for tokenised corporate bonds using DLT

Three companies have issued tokenised bonds worth Rs 1,025 crore so far; the pilot will test issuance, holding, trading and settlement using distributed ledger technology

The Securities and Exchange Board of India (Sebi) on Thursday launched Demat 2.0, a pilot project for tokenisation of corporate bonds using distributed ledger technology (DLT).

 

The initiative, jointly launched by Reserve Bank of India Governor Sanjay Malhotra and Sebi Chairman Tuhin Kanta Pandey at the Global Fintech Fest, will test a new way of issuing, holding, trading and settling corporate bonds.

 The pilot has so far seen three companies issue tokenised bonds aggregating ₹1,025 crore. REC was the first issuer on September 7, raising ₹500 crore from 18 investors; L&T raised ₹500 crore from four investors on September 9, while IIFL raised ₹25 crore.

 

 

Under this, corporate bonds are created as digital tokens on a distributed ledger, a shared electronic record maintained by market infrastructure institutions using DLT. The ledger is owned by the depositories.

 

“The bond remains the same instrument in law, the company’s obligation to repay is unchanged, and the rights of investors are unchanged. Requirements relating to credit rating, debenture trustees, listing and disclosures continue to apply in full,” Sebi noted, adding that the market will not be fragmented.

 

The system is connected to the RBI’s wholesale central bank digital currency (CBDC), digital rupee, through the Unified Market Interface (UMI). This enables atomic settlement, under which the bond and money move instantaneously.

 

Sebi said the technology is expected to make the issuance, settlement and servicing of corporate bonds faster, more efficient and less error-prone. Interest payments and redemption can also be handled automatically through smart contracts.

 

“Corporate bond is the best method to do a pilot—because there are some institutional players in it. There is stability. And there is not any intensive trading. Trading frequency is less. The next phase is that the secondary level of trading will be brought. That means you have the bond and you are holding it. Let's say you want to transfer. We have made a mechanism to transfer. It is in the sandbox,” said the Sebi chairman. 

The pilot is being implemented in phases. The first phase covers ongoing issuances, while later phases will extend to buying and selling the bonds through existing request-for-quote platforms and access for retail investors.

 

For investors, the bonds will be held in their existing demat accounts, with no separate account or fresh KYC required.