India’s capital markets regulator (SEBI) alongside the Reserve Bank of India (RBI) has officially piloted the Demat 2.0 program. This initiative marks the beginning of tokenizing the domestic corporate bond market, which is currently valued at $620 billion.
Details of the initiative were revealed directly by SEBI Chairman Tuhin Kanta Pandey and RBI Governor Sanjay Malhotra at the Global Fintech Fest. Under Demat 2.0, bonds are issued as digital tokens. This new instrument operates on a private permissioned ledger, with management entrusted directly to India’s two official depositories, NSDL and CDSL.
First Pilot Raises $107 Million
Three major Indian corporations immediately leveraged the system to raise a total of 1,025 crore rupees, or approximately $107 million. State-owned lender REC led the issuance by raising 500 crore rupees from 18 investors on September 7. Larsen & Toubro followed with the exact same amount, while financial services firm IIFL Finance raised 25 crore rupees.
Transaction speed on the system is powered by integration with the central bank’s wholesale digital rupee (CBDC). Demat 2.0 connects to the digital currency through the Unified Market Interface network. This infrastructure enables atomic settlement, allowing bond delivery and cash payments to exchange hands simultaneously on the offering day.
Legal Rights Remain Unchanged
The use of blockchain technology in this program does not alter the existing legal foundation for bonds. The legal rights of asset owners remain fully preserved. These digital instruments retain their original credit ratings, debenture trustee roles, exchange listing rules, and traditional investor protections.
The transition for investors was also designed with minimal friction. Bond tokens can be stored directly within existing Demat accounts. Investors do not need to undergo repeat Know Your Customer (KYC) verification procedures to hold these new instruments. While the asset transitions to a digital format, the custody ecosystem pairs the speed of blockchain with the certainty of established infrastructure.
Reported by Decrypt.
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