India is integrating blockchain technology into its traditional capital markets through a new system that combines tokenized corporate bonds with digital currency issued by the central bank.

The Securities and Exchange Board of India (SEBI) launched the Demat 2.0 pilot this week, using the electronic accounts investors already rely on to hold stocks and bonds. The initiative allows corporate bonds to be issued as digital tokens on a distributed ledger operated by regulated market institutions.

REC, the state-owned power-sector lender, raised ₹500 crore, equivalent to about $56 million, through the platform earlier this month. Larsen & Toubro raised another ₹500 crore, while IIFL Finance secured ₹25 crore, or approximately $2.8 million.

Despite being represented digitally, the bonds retain their traditional terms, including fixed interest rates, maturity dates and investor rights. The main difference is the settlement process, as the tokenized securities and the digital rupees used to purchase them can move simultaneously.

Demat 2.0 connects the tokenized bond ledger to the Reserve Bank of India’s wholesale digital rupee through the Unified Market Interface. This allows the payment and securities legs of a transaction to settle together, reducing the risk associated with delays between the two sides.

Under conventional settlement arrangements, payments and securities are processed through separate systems. If one side is completed before the other, a participant can be left exposed. Linking both components allows the transaction to settle in a more coordinated manner.

The system can also use smart contracts to manage corporate actions such as interest payments and redemptions. Future phases are expected to add secondary-market trading and eventually expand participation to retail investors.

India’s approach differs from the use of open blockchain networks. Although regulators have remained cautious about privately issued cryptocurrencies, India is frequently ranked among the world’s largest crypto-adoption markets.

Instead, regulators are applying blockchain-based tokenization within the existing financial infrastructure. Banks, securities depositories, regulated market institutions and central-bank digital money remain central to the model.

The Demat 2.0 pilot represents a broader effort to introduce blockchain-based settlement into India’s established financial markets while maintaining regulatory oversight over tokenized securities and their transactions.