Demat 2.0: SEBI brings tokenised corporate bonds to investors
What's the story
The Securities and Exchange Board of India (SEBI) has launched a new initiative called Demat 2.0. The pilot project aims to test the tokenization of corporate bonds, marking a major shift in how these financial instruments are issued, held, traded, and settled. The first phase of this project focuses on issuances while future phases will likely allow buying/selling through existing RFQ platforms and retail investor access.
Market transformation
Demat 2.0 redefines corporate bond market infrastructure
Nishchay Nath, founder & CEO of BondScanner, explained that Demat 2.0 is a new infrastructure for the corporate bond market.
He said it tokenizes bonds on a distributed ledger and settles them against the wholesale digital rupee in one simultaneous step.
This process eliminates the gap between security and cash leg, making settlement real-time and programmable, with smart contracts automating coupons/redemptions over time.
Investor benefits
Faster settlement and automation of bond servicing
The new system under Demat 2.0 could mean faster settlement for investors selling tokenized corporate bonds in the secondary market.
SEBI said funds that usually took two to three days to reach investors can now be received instantly, allowing them to deploy their money elsewhere sooner.
The pilot also introduces automation of bond servicing through smart contracts, reducing manual steps involved in servicing the bonds.
Regulatory assurance
Investor protections remain intact under new system
SEBI has assured that tokenization doesn't change the underlying nature of the corporate bond or dilute existing investor protections.
The bond remains the same legal instrument, the issuing company's obligation to repay remains unchanged, and investors' rights are intact.
SEBI also clarified that tokenized bonds will trade like bonds held in demat form, ensuring a unified market without fragmentation.
Implementation strategy
Future phases to include retail investor access
The current phase of Demat 2.0 focuses on issuances, with SEBI planning to extend buying/selling to existing RFQ platforms and provide retail investor access in later phases.
The experience from this pilot will inform wider rollouts.
So far, three companies have issued tokenized bonds under this initiative, raising a total of ₹1,025 crore.