- India is set to take a significant step toward modernizing its bond market with the issuance of its first tokenized corporate bonds next month, according to a Reuters report citing three sources familiar with the matter.
- The initial bonds are expected to be issued by REC, a state-owned power financing company, the sources said.
- Settlement for the tokenized bonds will likely use India’s central bank digital currency (CBDC), the digital rupee, which has been in pilot since late 2022.
- The bonds will have an initial three-month lock-in period, according to the sources.
- Exchanges are expected to develop a secondary market for these bonds by December.
- India's central bank digital currency (CBDC) has been in pilot since late 2022.
- Indian depositories are developing a new electronic wallet called DEMAT 2.0 to record bond holdings on a distributed ledger.
India is set to launch its first tokenized corporate bonds next month, with state-owned REC issuing notes worth less than ₹500 crore ($57 million). This pilot program will test blockchain technology for bond trading, utilizing the digital rupee for settlement, which has been in pilot since late 2022.1
The initiative aligns with the Reserve Bank of India’s broader exploration of blockchain applications in financial markets. Tokenized bonds, which represent ownership of a bond as a digital token on a blockchain, can reduce settlement times, lower costs, and improve liquidity. The bonds will be unveiled at an annual financial technology event in Mumbai next month.
During the pilot phase, the product will be offered only to a limited group of investors, with specific details on the issuing entity, schedule, and framework yet to be disclosed. Investors will need access to two digital accounts: a wholesale digital currency wallet and a new electronic securities wallet, termed DEMAT 2.0, which will record bond holdings on a distributed ledger technology chain.7
“Subsequent trades can take place only between participants that hold both compatible CBDC and securities wallets,” one source said. The bonds will have an initial lock-in period of three months, and stock exchanges are expected to develop a secondary market for these bonds by December.5
This move positions India alongside markets such as Europe and Hong Kong, which are also utilizing blockchain technology for issuing and settling bonds. The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are collaborating on this initiative, which could enhance efficiency and transparency in bond trading.
“The pilot will use India's CBDC, the digital rupee, for settlement, and investors will need two digital accounts—a wholesale CBDC wallet and a new DEMAT 2.0 securities wallet. The bonds will have a three-month lock-in, with exchanges expected to develop a secondary market by December.”
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