India's SEBI Launches $107 Million Tokenized Corporate Bond Pilot

India's securities regulator SEBI has launched a pilot program called Demat 2.0. Under the pilot, three companies issued tokenized corporate bonds worth more than $107 million. Settlement ran through the Reserve Bank of India's wholesale digital rupee instead of the usual banking clearing channels.

What SEBI actually launched

Demat 2.0 turns corporate bonds into digital tokens recorded in a registry supervised by the regulator. It's a logical follow-up to the 1990s reform, when India moved shares and bonds from paper certificates to electronic demat accounts and, within a decade, largely removed physical securities from circulation. Now SEBI is adding another layer. It comes down to tokenization on a distributed ledger that runs alongside the existing depositories NSDL and CDSL, rather than replacing them. Unlike public networks such as Bitcoin, the Demat 2.0 registry stays permissioned, with access limited to authorized participants under SEBI's oversight. According to the regulator, tokenization should speed up bond issuance and settlement and cut operating costs for issuers compared with paper-based processes.

In the first phase, only institutional issuers were admitted to the pilot. Three companies from different sectors of the economy jointly raised more than $107 million, and the deals closed without classic intermediary banks handling clearing. SEBI didn't disclose the participants' names but confirmed the issuance went through without technical glitches and on schedule. At the same time, India remains one of the countries with the toughest taxation of private cryptocurrencies. Profits from coin trading are taxed at a flat 30%, and every transaction is also subject to a tax deducted at source. SEBI, for its part, is building a separate tokenization infrastructure, entirely under state control and outside that regime.

Settlement through a digital rupee instead of bank transfers

The most unusual detail of the pilot isn't the tokenization itself, but the payment method. Bond settlement ran through RBI's wholesale digital rupee, a version of the central bank's digital currency built exclusively for interbank and institutional transactions rather than retail payments. RBI has been testing this digital rupee since November 2022, when the first transactions moved between banks to settle government securities trades. Several major Indian banks took part in those early tests. Demat 2.0 now extends that same infrastructure to the corporate debt market.

Globally, tokenized assets are most often settled through the Ethereum network or tokens like USDT. Institutional players tend to favor private stablecoins for the speed of transfers and the liquidity available on exchanges. India chose a different path, keeping the entire settlement chain under RBI's direct control, with no private stablecoin issuers involved. That gives the regulator real-time visibility into fund flows and avoids risks tied to the reserves or volatility of private tokens.

Who took part and what happens next

SEBI confirmed that the current stage of Demat 2.0 is limited to a narrow group of institutional players. The three companies involved in the first issuance represent different sectors of the economy, though the regulator hasn't publicly named any of them. Per SEBI's official comments, the pilot's next phases will gradually expand what tokenized bonds can do. Tokenization also lowers the minimum entry threshold. Classic corporate bonds in India are often sold in lots of $100,000 or more, while tokenized instruments will eventually be splittable into much smaller shares.

• At first, tokenized bonds are available only to institutional investors
• Next, SEBI plans to launch secondary trading of tokenized bonds on a regulated venue
• In the final stage, retail investors will gain access to these instruments

SEBI hasn't named an exact date for the second phase. The regulator only said the rollout would happen gradually, with separate oversight at each stage, to avoid mistakes seen in earlier tokenization pilots elsewhere. India already has similar experience with retail access to the debt market: the RBI Retail Direct platform has let private investors buy government securities directly, without intermediaries, since 2021. Tokenized corporate bonds could eventually get a similar access channel for ordinary savers.

What this means for the tokenization market

India's pilot fits into a broader global trend. Hong Kong and Switzerland have already run similar experiments with tokenized bonds, with their central banks also testing settlement through their own digital currencies instead of private stablecoins. In the US, that niche is still dominated mostly by private players: large asset managers like BlackRock and Franklin Templeton already offer tokenized money market funds built on public blockchains. The difference is that India tied its state-run pilot directly to one of Asia's largest debt markets, rather than leaving tokenization to private companies.

If Demat 2.0's next phases roll out without problems, India's corporate bond market could become one of the largest examples of state-driven debt tokenization in the world. Retail investors would then gain access to instruments that have so far stayed strictly institutional, while RBI would have ready-made infrastructure for settlement outside private stablecoins.