SEBI Launches Demat 2.0 Pilot to Modernize Bond Market

The Securities and Exchange Board of India has launched a pilot program for Demat 2.0, a major initiative aimed at modernizing the bond market through tokenisation. By leveraging blockchain-based technology, this framework introduces fractionalisation to make debt instruments more accessible to retail investors who previously faced high entry barriers.

How the Tokenisation Mechanism Operates

The framework relies on digital asset integration to streamline traditional debt trading processes. Here are the core operational changes introduced under the initiative:

• Enables the fractionalisation of bonds to lower entry barriers for retail market participants.
• Leverages blockchain-based technology to facilitate real-time tracking of ownership and interest payments.
• Integrates directly with existing demat accounts so investors can manage digital assets alongside traditional equities.

Market Liquidity and Settlement Improvements

The operational updates are structured to resolve longstanding friction points in secondary debt trading. The framework delivers distinct structural advantages for market participants:

• Shortens and simplifies the settlement cycle for debt transactions.
• Increases secondary market liquidity by allowing the trading of smaller debt denominations.
• Reduces transaction costs while enhancing overall security protocols for digital assets.