SEBI Launches Demat 2.0 Pilot for Tokenised Corporate Bonds With CBDC-Based Atomic Settlement
The Securities and Exchange Board of India has launched a “Demat 2.0” pilot to test tokenised corporate bonds on distributed ledger technology, while retaining the existing legal and regulatory framework for corporate debt. SEBI announced the pilot on September 10, 2026 through Press Release No. 56/2026 and issued a detailed FAQ explaining how issuance, holding, trading, settlement and servicing are intended to work.
The experiment is significant because it does not create a parallel unregulated crypto-style market. The token itself represents the corporate bond, the bond continues to be a security under the Securities Contracts (Regulation) Act, 1956, and the existing ISIN, issuer obligations, coupon, maturity, covenants, credit rating, security package and investor rights continue to apply. SEBI’s stated design is to test whether distributed ledger technology can reduce settlement friction and reconciliation work without weakening legal certainty or investor safeguards.
How Demat 2.0 is designed
Under the pilot, the distributed ledger is a private, permissioned infrastructure operated through market infrastructure institutions. SEBI’s FAQ says the depositories remain the authoritative record keepers, while the distributed ledger can be used to maintain tokenised holdings and execute selected processes through smart contracts. The initial infrastructure is expected to involve depositories and exchanges, with technology support from the National Payments Corporation of India.
A Demat 2.0 holding is not meant to require an investor to open an entirely separate demat relationship. SEBI describes the Demat 2.0 account as an extension of the existing demat account. Existing know-your-customer requirements therefore continue, and the pilot does not create a fresh KYC regime merely because the security is represented on a distributed ledger.
CBDC enables atomic delivery-versus-payment
A central feature of the pilot is the use of central bank digital currency for the cash leg. Issuers and participating investors use CBDC wallets within the Reserve Bank of India’s e₹ framework. The objective is atomic delivery-versus-payment: the securities leg and the funds leg should settle together, so either both occur or neither occurs.
This is intended to reduce the counterparty exposure that can arise from a time gap between movement of securities and movement of money. For finance teams, treasury professionals and market intermediaries, the key point is that the pilot is testing a different settlement rail rather than changing the economic terms of the bond.
Existing issuance and trading infrastructure remains relevant
SEBI has not proposed a separate tokenised exchange for these bonds. The existing Electronic Bidding Platform continues to be used for issuance, with the ISIN identified as part of the tokenised pilot. Secondary-market activity is expected to use existing request-for-quote and over-the-counter reporting arrangements linked to the distributed-ledger infrastructure.
The FAQ also makes clear that core regulatory requirements continue. Applicable requirements relating to credit rating, listing, disclosures, debenture trustees, investor protection and other corporate-bond compliances do not disappear because the instrument is tokenised. Existing freezes, attachments and similar restrictions on demat holdings are also intended to apply to tokenised holdings.
Smart contracts could automate servicing
One of the practical areas being tested is asset servicing. Bond terms can be encoded into smart contracts so that coupon payments, redemption and other corporate actions can be processed with less manual reconciliation. Today, servicing often requires depository data, calculations and separate payment workflows. A shared ledger combined with CBDC could allow authorised participants to see the relevant bondholder record and execute payment logic in a more synchronised way.
For auditors and control functions, automation does not remove the need for evidence, authorization or reconciliation controls. Instead, it changes where those controls may sit: more of the transaction logic may be embedded in code and shared infrastructure, increasing the importance of governance over smart-contract rules, access rights, exception handling and data integrity.
Three-stage rollout
SEBI’s FAQ describes a staged approach. Stage I focuses on tokenised issuance for institutional participants through the existing EBP framework and on asset servicing. Stage II envisages secondary trading and eventual retail access, with peer-to-peer arrangements possible during the interim architecture. Stage III may consider additional nodes and extension to other instruments after experience from the pilot.
The pilot is being run within SEBI’s Regulatory Sandbox framework, allowing defined regulatory relaxations where necessary for controlled testing. Contemporary reporting on the launch said the first phase began with three issuances aggregating ₹1,025 crore: ₹500 crore each from REC Limited and Larsen & Toubro Limited and ₹25 crore from IIFL. The launch is initially focused on institutional investors.
What CAs and finance teams should watch
- Accounting and controls: Tokenisation changes the settlement and record-keeping technology, not the contractual economics of the debt instrument. Finance teams should therefore focus on interface controls, authorization, completeness of ledger records and reconciliation between systems.
- Treasury operations: CBDC-based atomic settlement could affect funding, settlement timing and liquidity workflows if the model is scaled beyond the pilot.
- Audit evidence: Distributed-ledger records may improve traceability, but auditors will still need to evaluate system governance, access controls, smart-contract logic and the reliability of information used as audit evidence.
- Compliance: Existing bond-market duties continue. Tokenisation is not a waiver from disclosure, listing, rating, trustee or investor-protection requirements.
The immediate takeaway is that Demat 2.0 is a controlled market-infrastructure experiment, not a replacement of the existing corporate-bond law. Its importance lies in whether India can combine tokenised securities, CBDC settlement and smart-contract servicing while preserving the familiar regulatory perimeter and authoritative depository records.
Official source: View the official source document
Key takeaway
SEBI’s Demat 2.0 pilot tests tokenised corporate bonds on a permissioned distributed ledger while retaining existing bond-law safeguards, with CBDC used for atomic delivery-versus-payment.
