Tokenized bonds pass the launch test. The real challenge starts now
RWA Signal Insight
InfrastructureIndian firms Rural Electrification Corp., Larsen & Toubro, and IIFL Finance have successfully completed tokenized corporate bond issuances, marking a significant technological milestone for the nation's debt market. REC raised Rs.500 crore, L&T raised Rs.500 crore, and IIFL Finance raised Rs.25 crore using distributed ledger technology and the Reserve Bank of India's central bank digital currency (CBDC). While these transactions demonstrate the viability of atomic delivery-versus-payment settlement, market participants characterize them as largely ceremonial due to the lack of a functioning secondary market. The current infrastructure requires investors to manage separate CBDC and electronic securities wallets, creating friction that hinders widespread adoption. Experts emphasize that the next critical phase for 'Demat 2.0' is achieving interoperability between these new digital environments and existing bond-market infrastructure. Without a robust financing ecosystem and secondary market liquidity, the benefits of instant settlement remain limited compared to established T+1 workflows. Ultimately, the success of Indian bond tokenization depends on integrating these digital assets into the broader financial system while simplifying the user experience.
Key points
- REC, L&T, and IIFL Finance raised a combined Rs.1,025 crore via tokenized bonds.
- Transactions utilized RBI's CBDC and DLT to achieve near real-time settlement.
- Lack of secondary market liquidity and interoperability remain primary barriers to adoption.
- Current infrastructure requires investors to maintain separate CBDC and digital securities wallets.
Background
Demat 2.0 refers to the evolution of India's electronic securities holding system, transitioning from traditional depository records to distributed ledger technology. This framework aims to integrate central bank digital currencies with tokenized assets to enable atomic settlement, where the exchange of securities and payment occurs simultaneously. It is designed to modernize the settlement cycle and reduce reliance on legacy clearing house intermediaries.