India is gearing up to issue its first tokenized corporate bonds next month, using the central bank’s wholesale digital rupee to settle trades on blockchain infrastructure — a landmark pilot that could reshape how corporate debt is issued and settled. Key points - Issuer: State-owned power financier REC (Rural Electrification Corporation). - Size: Less than 5 billion rupees (~$57 million). - Partners: Pilot being developed with the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). - Settlement asset: RBI’s wholesale central bank digital currency (wholesale e₹). - Infrastructure: Bonds and ownership records maintained on distributed ledger technology (DLT); securities recorded via a new DEMAT 2.0 framework being built by India’s depositories. - Access: Initial offering limited to a select group of investors; expected unveiling at a Mumbai fintech event next month. - Structure: Three-month initial lock-in; exchanges aim to enable a secondary market by December for participants holding compatible wallets. What the pilot will test The REC issuance is designed to test whether DLT can speed up issuance, recording and settlement of corporate bonds by keeping ownership and transaction records on-chain and enabling near-instant settlement when assets move between participants. The arrangement seeks to bypass the conventional electronic book-provider system used for debt placements and instead settle cash and securities across connected digital infrastructure. How participants will transact According to sources, each participant will need two dedicated digital accounts: 1) a wholesale CBDC wallet provided by a bank (for the cash leg), and 2) a DEMAT 2.0 securities wallet (to hold tokenized bonds). Only investors with both compatible wallets will be able to trade tokenized bonds after the three-month lock-in; the securities ledger on the DLT will record ownership transfers between approved participants. Regulatory and market context This pilot builds on regulatory groundwork SEBI disclosed in May, when Chairman Tuhin Kanta Pandey confirmed a limited DLT pilot for corporate bond trading and settlement and said RBI was developing the necessary guidelines. Industry estimates put India’s corporate bond market at nearly 59 lakh crore rupees, but secondary-market activity is relatively thin — many institutions hold bonds to maturity and retail participation is low — making settlement efficiency an attractive target for experimentation. CBDC and tokenization background India has already been testing central bank money in digital form: the RBI launched a wholesale CBDC pilot (e₹-W) in November 2022 and a retail digital rupee pilot in December 2022. By late 2023–2024, the central bank expanded pilots to include CBDC-linked deposits and examined tokenization of commercial paper and other money-market instruments. Using the wholesale digital rupee as the cash leg for tokenized corporate bonds extends those experiments into corporate debt markets. Policy stance on crypto vs. tokenized regulated assets RBI has signaled a cautious stance toward cryptocurrencies, recommending that banks and payment systems be shielded from crypto activity while India finalizes digital asset policy. At the same time, the central bank has urged a clear distinction between speculative cryptocurrencies and tokenized regulated financial assets — such as government securities and corporate bonds — so that crypto restrictions don’t block regulated tokenization initiatives. Broader tokenization activity in India Beyond bonds, authorities are exploring tokenization in other sectors. Maharashtra state has moved to draft a law to enable tokenization and exchange of land-linked assets, with an expert committee including SEBI and major exchanges preparing a framework. What this means If successful, the REC pilot could demonstrate faster, more transparent settlement for regulated securities using a CBDC and DLT, and pave the way for broader adoption of tokenized instruments in India’s large corporate bond market. Regulators are proceeding cautiously — limiting initial access and testing interoperability and operational details — but the project marks a concrete step from conceptual pilots toward live tokenized issuance in a heavily regulated market. Read more AI-generated news on: undefined/news