India to Launch First Tokenised Corporate Bond Issue Next Month
India is set to launch its first tokenised corporate bond offering next month, a pilot that will test the use of blockchain technology for instant settlement of transactions. The move, reported by three sources with direct knowledge of the matter who spoke on condition of anonymity, would place India alongside markets such as Europe and Hong Kong in using the technology for bond issuance and settlement.
The tokenised notes, to be issued for the first time by state-owned power financier REC, will be worth less than 5 billion rupees ($57 million), according to the sources. Tokenised bonds are securities whose ownership, issuance, trading and settlement are recorded digitally on a blockchain or distributed ledger, allowing transactions to be completed almost instantly.
India's markets regulator and central bank are working together to push the technology, the sources said. The offering is expected to be unveiled at an annual financial technology event in Mumbai next month. India's central bank digital currency (CBDC) will be used to purchase the tokenised bonds, one of the sources added.
Details about the issuer, timeline and framework have not been reported before. The offering would be available only to a select group of investors at the pilot stage, according to one of the sources; Reuters could not ascertain the names of the investors.
The central bank, markets regulator and REC did not respond to emails seeking comment, Business Standard and The Economic Times reported.
How the framework would work
To participate, investors will need two digital accounts: a wholesale digital currency wallet provided by a bank, and a new electronic securities wallet, the sources said. Indian depositories are developing an e-wallet called DEMAT 2.0, described as a first of its kind, which will record bond holdings on a distributed ledger technology chain.
Subsequent trades can take place only between participants that hold both compatible CBDC and securities wallets, according to the sources. The bonds will carry an initial three-month lock-in, and exchanges are expected to develop a secondary market by December. The securities will not be traded on the conventional electronic book provider platform.
The pilot is seen as a step toward modernising India's bond market infrastructure, aligning it with global experiments in using blockchain for securities settlement. The use of the central bank digital currency for purchasing the tokenised bonds would mark a convergence of two emerging financial technologies in the country's capital markets.
The sources spoke on condition of anonymity because the discussions are ongoing and confidential. Neither the Reserve Bank of India, the Securities and Exchange Board of India, nor REC responded to requests for comment. The pilot is expected to proceed at the Mumbai fintech event, though the sources cautioned that the timeline could shift given the confidential nature of the talks.