India’s First Tokenized Bond: REC Pilot in September
By Business Desk
India gears up for its first tokenized corporate bond issuance in September, with REC piloting the blockchain-based securities program. Learn about the details and implications.
India is preparing for its first tokenised corporate bond issue in September, led by state-owned power financier REC. This initiative will pilot blockchain-based securities, placing India among nations exploring distributed ledger technology for bond issuance.
Key details of the pilot include:
- REC’s offering is anticipated to be under Rs 500 crore.
- The initial lock-in period for these bonds will be three months.
- Stock exchanges are expected to establish a secondary market by December.
Blockchain’s Role in Securities
Tokenised bonds leverage blockchain or distributed ledger technology (DLT) for recording ownership, issuance, trading, and settlement. This digital framework aims to deliver faster transaction settlements and reduce the conventional processing associated with bond markets. The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are collaborating to integrate DLT into India’s financial markets.
Integrating CBDC and Digital Wallets
A central element of this pilot involves the integration of India’s central bank digital currency (CBDC), which investors will use for bond purchases. Participants will need a wholesale CBDC wallet from a bank, alongside a new “DEMAT 2.0” electronic securities wallet. This new wallet, developed by Indian securities depositories, will record bond holdings on DLT.
This creates a closed digital ecosystem designed for seamless payment and securities transfer. The tokenised securities will not trade on existing electronic book provider platforms. An official announcement is expected at an upcoming financial technology event in Mumbai.
Pilot Objectives and Future Outlook
The pilot aims to evaluate the efficiency of blockchain-based infrastructure in bond issuance and settlement. This could potentially reduce risks and streamline transactions through integrated digital systems. This move further extends India’s experiments with digital financial infrastructure, testing the interaction between digital currency and tokenised securities.