India tokenizes corporate bonds and settles them in central bank money

What happened

The Securities and Exchange Board of India announced on 10 September 2026 that three companies had raised Rs 1,025 crore, about $107m, in corporate bonds issued as digital tokens on a distributed ledger and settled against the Reserve Bank's wholesale central bank digital currency. Press release 56/2026 says the announcement 'was made jointly by Shri Sanjay Malhotra, Governor, RBI and Shri Tuhin Kanta Pandey, Chairman, SEBI, at the Global Fintech Fest, Mumbai'. It names the three issues. REC Limited, which the release describes as a public sector NBFC, was first, on 7 September 2026, raising Rs 500 crore from 18 investors. L&T Limited was second, on 9 September, raising Rs 500 crore from 4 investors. IIFL, a private NBFC, was third, on 9 September, raising Rs 25 crore from 1 investor. The release describes the infrastructure plainly: 'The bond is created as a digital token on a distributed ledger', which is 'a shared electronic record maintained simultaneously by market infrastructure institutions using Distributed Ledger Technology (DLT)', and 'The ledger is owned by the depositories.' It is 'connected to RBI's wholesale CBDC (e-rupee) through Unified Market Interface (UMI) of RBI. This enables atomic settlement, i.e., the bond and the money move instantaneously.' Asset servicing, including interest payments and redemption, 'can be handled automatically through smart contracts'. The release lists six advantages, of which the first is that funds are received by the issuer on the same day as bidding where it generally used to take two to three days, and the last is that interest and redemption payments are credited in central bank money to bondholders' CBDC wallets on the due date, triggered automatically by smart contract. It then makes a claim of priority, and the claim is carefully bounded. Under a heading of 'Global Precedents. How is India different?' it names 'Project Helvetia III in Switzerland, Project Evergreen in Hong Kong, treasury bonds of US, bonds from BlackRock, JP Morgan, AIIB' and says that in those cases 'tokenisation has largely been undertaken by individual issuers on separate platforms'. Its own claim is that 'India is the first country in which corporate bonds have been issued natively on a distributed ledger, with the record of ownership held by a country's statutory depositories and the funds leg settled in central bank digital currency, within the existing regulated market infrastructure.' A 24-question FAQ was published beside the release and carries the architecture. 'The token is the corporate bond.' The bond keeps the same ISIN, flagged as a pilot or tokenised ISIN, and retains 'the same issuer obligations, coupon, maturity, covenants, rating, security and investor rights as a conventional dematerialised bond'; it 'remains a security under the Securities Contracts (Regulation) Act, 1956'. Issuance runs through the existing Electronic Bidding Platform of the stock exchanges, with bidding, modification, cancellation and allotment timelines unchanged. The issuer needs no Demat 2.0 account but does need a CBDC wallet linked to its designated bank account. The investor needs no new demat account and no fresh KYC, because a Demat 2.0 account 'is an extension of the investor's existing demat account and is not a separate demat account'. Question 7 disposes of self-custody: 'The depositories will hold and manage the private keys on behalf of investors. Therefore, investors do not need to independently manage cryptographic keys or acquire specialised DLT infrastructure.' Question 16 disposes of the ledger's legal status: 'The depository remains the authoritative record of beneficial ownership. The DLT ledger is the form in which the record is maintained for purposes of the pilot; it does not displace the depository's statutory role under the Depositories Act, 1996.' There is no new venue: 'The pilot does not propose a separate trading venue or segregated market segment', and existing request-for-quote and over-the-counter reporting platforms 'will be linked to the DLT infrastructure'. Existing freezes and attachments carry across to the token holding. The infrastructure is 'being developed and operated by the Market Infrastructure Institutions (MIIs), with technology and implementation support from NPCI', the ledger is private and permissioned, and nodes are run initially by the depositories and the stock exchanges. The pilot runs under SEBI's Regulatory Sandbox and in three stages: institutional issuance now, secondary trading and retail access at stage two, and an extension of nodes to credit rating agencies, depository participants and other regulated entities at stage three. Question 19 sets out an interim exit before secondary trading opens, and it is the one place the design gives something up: 'a peer-to-peer/demat-to-demat transfer may be enabled on request through Depositories. The payment leg may be completed outside the atomic settlement architecture through CBDC or banking channels.' The Reserve Bank published no press release about the launch. Its Governor's keynote of the same day, at the same conference, is the only central bank document, and it places the bonds in a sequence: 'Our tokenisation initiatives including Certificates of Deposit issued through the Unified Markets Interface using wholesale Central Bank Digital Currency (CBDC) are helping us understand the potential future architecture of financial markets. Today, we take the next step in our tokenisation journey as we unveil the tokenisation of corporate bonds with settlement through CBDC as a joint initiative with SEBI and with the involvement of other stakeholders.' The Governor writes Unified Markets Interface where SEBI's release writes Unified Market Interface, and neither document describes what it is.

Why it matters

The design decision that matters here is not the token, it is where the record sits, and SEBI has answered that question in the opposite direction to almost every tokenization project this corpus covers. The FAQ says twice that the depository remains the authoritative record of beneficial ownership under the Depositories Act, 1996, and that the ledger is merely the form in which that record is kept. India has not moved the register onchain. It has changed the database beneath a register that stays statutory, which is why the pilot needs no new law, no new asset class and no amendment to the definition of a security. Read beside the same day's European risk monitor, the two documents are a natural experiment in how to do this. Europe's supervisor found a tokenized equity market made almost entirely of wrapped claims whose transfer conveys no legal title, and warned that multiple representations of the same instrument split its liquidity. India's answer to both problems is to refuse to create a second instrument at all: the token carries the same ISIN as the bond, and the pilot 'does not propose a separate trading venue'. That is also the answer to the European fight this desk covered on 7 September, where twenty-seven firms and associations asked Brussels to lift the ceiling on a separate DLT market infrastructure regime. India did not build a parallel regime with a cap on it; it put the ledger underneath the market that already exists. The second thing to see is what has been given up to get there. The depositories hold the investors' private keys. There is no self-custodial wallet, no key for a retail investor to lose and no direct ownership in the sense the technology is usually sold on, and the reward is that the pilot asks nothing of anybody: no new account, no fresh KYC, no hardware, no infrastructure spend. Whether that is a compromise or the point depends on what one thinks tokenization is for. If it is for disintermediation, this is not it. If it is for settlement efficiency, the intermediaries were never the problem and removing them was never the gain. The gain is in the third thing, which is the cash leg, and it is measurable. The corpus has three tokenized settlement stories from the same week, and the other two settle in commercial money: U.S. Bank minting its own dollar on Stellar, DBS and Citi moving dollars across a weekend on Swift's ledger. Here the funds leg is a central bank liability, and the release puts a number on what that buys: proceeds reach the issuer on the day of bidding rather than two to three days later, and coupons reach holders' wallets automatically on the due date. For an issuer raising Rs 500 crore that is two or three days of working capital, and for the market as a whole it is the removal of the interval in which counterparty exposure lives. Finally, the priority claim is worth reading closely because it is written by someone who knew it would be checked. It does not say India was first to tokenize a bond, or first to settle one in central bank money. It says India is first to do it natively, with the record held by the country's statutory depositories, with the funds leg in CBDC, and inside the existing regulated market infrastructure, and the release names the precedents it is distinguishing itself from. Helvetia III settled tokenized bonds in wholesale central bank money, but on a separate digital exchange rather than through the national depository. That is a four-limbed claim, and the limb that does the work is the fourth.

What is not settled

Atomic settlement is the whole of the argument and the pilot has already carved an exception into it. Question 19 says that before secondary trading is enabled a peer-to-peer transfer may be arranged through the depositories and that the payment leg 'may be completed outside the atomic settlement architecture', which means the benefit disappears precisely where an investor needs to sell. No date is given for stage two, when secondary trading and retail access arrive, or for stage three; the release says only that first-phase issuances are ongoing, and the FAQ says any sandbox relaxation is for a defined scope and period without naming either. Neither document identifies the ledger software, the consensus arrangement, the number of nodes, or which banks hold the CBDC wallets on either side of the trade; NPCI's role is given as 'technology and implementation support' and nothing more. No pricing is published. Reports put REC's issue at 7.30 per cent for one year and nine months against a book of about Rs 796 crore, but the regulator publishes amounts and investor counts only, so the cost of funds cannot be compared with a conventional issue and the central commercial question, whether tokenized bonds price cheaper, is unanswerable from the primary. The scale is three issues and 23 investors in total, one of them a single investor, which is a pilot rather than a market. The Reserve Bank has published nothing: its Governor's keynote is the only central bank document, it names the rail Unified Markets Interface where SEBI names it Unified Market Interface, and neither says what it is or how a CBDC wallet is linked to a designated bank account. SEBI's own regulatory sandbox status page, which is where the regulatory basis for the pilot should be visible, was last updated in December 2024 and lists 13 applications, none of them this. None of the three issuers has published anything this desk could read: REC Limited's own domain fails TLS with a self-signed certificate chain, its alternate domain times out, and BSE's announcements service answers 'No Record Found!' for its scrip code. And the FAQ says a freeze or attachment on a demat account carries across to the linked token holding without saying what happens to a smart contract that is due to pay a coupon while the holding is frozen, or what the recovery path is if the contract executes wrongly on a ledger the depositories control but do not, in law, constitute.