India is planning to launch its first tokenised corporate bond issue in September, using blockchain technology and the country’s wholesale central bank digital currency (CBDC), Reuters reported on August 24. According to the report, state-owned power financier REC is expected to issue tokenised bonds worth less than ₹5 billion ($57 million). The pilot would be limited to a select group of investors and could be unveiled at an annual financial technology event in Mumbai next month.
Reuters said the planned issue would test whether blockchain technology can enable faster settlement of bond transactions. Tokenised bonds record their issuance, ownership, trading and settlement digitally on a blockchain or distributed ledger.
According to the report, India’s central bank digital currency would be used to purchase the bonds. The pilot is being developed with the involvement of the country’s central bank and market regulator, although the institutions have not officially confirmed the plans.
The report also said that investors participating in the pilot would need two digital accounts. One would be a wholesale digital currency wallet provided by a bank, while the other would be a new electronic securities wallet.
Indian securities depositories are reportedly developing the second wallet, called “DEMAT 2.0”. The report said, the wallet would record bond holdings on distributed ledger technology and that that subsequent trades would only be possible between participants holding compatible CBDC and securities wallets.
The tokenised bonds are expected to have an initial three-month lock-in period, Reuters reported. Exchanges are also expected to develop a secondary market for the bonds by December. The securities would not be traded through the conventional electronic book provider platform, according to the report.
The pilot would place India alongside markets such as Europe and Hong Kong that are exploring blockchain-based bond issuance and settlement. However, as the plans have not been officially confirmed, the reported issue size, timeline and operating framework should be viewed as provisional.
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