India is set to launch its first tokenised corporate bonds in September, marking a major step towards using blockchain technology in the country’s debt market. State-owned power financier REC will issue the pilot bonds, with the size expected to be below Rs 500 crore.
According to people familiar with the plan, the pilot will be offered to a limited group of investors and is expected to be unveiled at a financial technology event in Mumbai. The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are working together on the initiative.
Tokenised bonds record ownership, issuance, trading and settlement on blockchain or distributed ledger technology. The system could reduce settlement times and allow transactions to be completed almost instantly compared with traditional processes.
The planned issue will use India’s central bank digital currency (CBDC) for purchases. Investors are expected to require two digital wallets — a wholesale CBDC wallet provided by a bank and a securities wallet designed to hold tokenised bonds.
Indian depositories are developing a new electronic securities wallet, described as “DEMAT 2.0”, to record bond holdings using distributed ledger technology.
The bonds are expected to have a three-month lock-in period. Stock exchanges may develop a secondary market by December, allowing investors to trade the securities after the lock-in period.
The pilot will give regulators and financial institutions an opportunity to test blockchain-based bond issuance, digital securities wallets and CBDC-based settlement. Its performance could influence the wider adoption of tokenised securities in India.
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