The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have launched DEMAT 2.0; a pilot for tokenised corporate bonds in September 2026, with REC Ltd becoming the first issuer of these securities. Tokenised bonds are securities that leverage blockchains or Distributed Ledger Technology (DLT) to record ownership, alongside facilitating their issuance, trading and settlement. Its implementation will facilitate real time settlements and improve liquidity in the secondary bond market.
Why does this matter now?
India’s corporate bond market has grown from ₹150 million in 2015 to over ₹590 million in 2026. But it is still smaller when compared to the ₹120 trillion government securities market. It is also highly concentrated and dominated by high rated issuers and sees reduced participation from MSMEs and foreign portfolio investors. This creates a structural imbalance which acts as a barrier for smaller firms to access affordable capital and further reduces market liquidity.
Strengthening the corporate bond market to achieve balance and a resilient financial architecture is a critical financial sector reform. Tokenisation, being one of these initiatives, aims to improve liquidity, reducing friction and enabling automated and instant settlements. The greatest benefit of tokenisation of assets, is that it allows an asset owner to instantly liquify portions of their assets globally, without having to sell off their entire asset. Smart contracts using DLT further facilitate data integrity and transparency to their distribution.
| What is Distributed Ledger Technology (DLT) ?
Distributed Ledger Technology (DLT) is a decentralised, digital infrastructure that allows for a network of multiple participants or ‘nodes’ to examine and synchronise their records and transactions in a secure manner. Each of the data ledgers across the network have the exact same records that are controlled and maintained by the nodes, and distributed via an encrypted format, making them immutable in nature. Being decentralised in nature, DLTs also do not have a centralised administration, ensuring that no single entity has complete control over the network. This differentiates them from traditional databases, and promotes transparency and trust that is built among the different parties involved. What are Tokenisation Based Systems? Tokenisation based systems that incorporate DLT are usually financial assets that are digitally represented and regulated on a digital ledger. A unit called a ‘token’ represents the digitised financial asset, and this token is added to and exchanged through transactions on a distributive ledger. Tokenised coins are an example of a DLT payment system. These are assets that are built on existing blockchain platforms by smart contracts. They are generally governed by the smart contracts themselves to perform distinct applications. Unlike a native coin like Bitcoin, a token coin is built upon the framework of an existing blockchain platform. This platform provides the security measures, while the token coin in itself provides unique features as defined by its code in the smart contract. Each token coin is allowed to have a uniquely defined value in accordance to the smart contract that it is attached to, and new tokens are automatically generated and distributed by the smart contract based on predefined codes. Asset based tokens also act as digital twins for their physical counterparts; the physical assets are kept in custody while the digital asset, through smart contracts can be traded globally. Using DLT, the value of the digital asset, through the smart contract, will automatically mimic its physical value at all times and these can also be liquified instantly. What is a Smart Contract? A smart contract is a self-executing agreement that runs on DLTs. It allows for functions like transactions on the DLT to be automated, making them more traceable and immutable in nature. In a traditional contract, where two parties may not know each other, an intermediary or legal system fulfills the role of accountability and trust. In the case of smart contracts, this need for an intermediary is eliminated entirely, making them secure and more desirable for near-immediate transactions. When created, the contract does not need to ‘pick a side’; its framework allows for outcomes to be executed systematically when predetermined actions or functions are met. For example, a smart contract will release funds deposited by a buyer to the seller once the former receives their delivery or return the funds if the seller fails to execute the delivery. Smart contracts also allow for global transactions to be executed; anyone with a digital wallet can execute a transaction. An example of tokens that are currently being deployed through smart contracts is programmable money. In the case of India, programmable money can be identified as the Central Bank Digital Currency (CBDC); also known as the Digital Rupee (e₹). The e₹ is the RBI’s digital form of physical currency and its value is on par with it. Stored in a digital or e₹ wallet, the e₹ are produced on a limited scale, made safe and secure while also promoting efficiency and eliminating forgery and physical damage. |
The use of DLT in the Financial sector
So far, DLT has already been incorporated into some sections of India’s financial infrastructure; it has been mainly used by depositories for covenant monitoring. In 2022, a Security and Covenant monitoring system was built on DLT and launched by SEBI to monitor and record covenants of not-convertible securities by Credit Rating Agencies (CRAs).
Many ecosystem efforts aimed at tokenisation and use of DLTs in the financial sector have been undertaken recently. Kinexys (formerly Onyx) by J.P. Morgan is a form of programmable and liquified token that converts assets and currency into instant programmable resources. It comprises Kinexys Digital Payments that allows for currency to be distributed instantly across geographical boundaries, and Digital Assets and Financing that supports the tokenisation of these assets using smart contracts. As of 2026, Kinexys supports 8 currencies for blockchain settlements globally.
To facilitate green finance, Hong Kong adopted tokenised ‘government green bonds’ that used DLT to enhance efficiency and transparency in the bond market. In 2023, the Hong Kong Monetary Authority (HKMA) executed the first ‘tokenised government green bond’ in the world worth HK$800, reducing settlement time from t+5 to t+1 (five days to one day).
Emerging Use Cases in India
As of September 2026, Chief Minister Devendra Fadnavis announced the (Digitisation and Exchange of Land Token Asset) DELTA legislation for Maharashtra. Guided by SEBI, the Bombay Stock Exchange and the National Stock Exchange, the Act is being developed to provide regulatory oversight for land tokenisation. Once billed, the DELTA Act will become India’s first legal framework incorporating tokenisation of land and immovable assets on blockchain.
SEBI’s tokenisation framework was also used by Larsen & Toubro, a private sector corporate in India. They raised ₹5 billion through tokenised bonds, becoming the first private sector corporate to do so. By implementing CDBC-based settlement architecture to these tokenised bonds, they aim to foster seamless and secure transactions and improve market liquidity.
The Policy Ecosystem surrounding Tokenisation
Policy guidance in these areas is quite nascent, with the United States’ Guiding and Establishing National Innovation for the US (GENIUS Act), aiming to provide more regulatory clarity on digital assets. Starting in 2027, it will especially apply to stablecoins; a digital tokenised asset that is designed for stability by attaching its value to a reserve asset and can be securely exchanged globally via blockchain. This is also a major reason for the increasing use of stablecoins in smart contracts globally. By legitimising stablecoins, the GENIUS Act puts pressure on traditional finance institutions to start adopting DLT solutions and overall, allow for the entire ecosystem to start offering them as liquid cash management solutions.
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