Market AnalysisAug 26, 20262 Min
REC To Issue India’s First Tokenised Bonds Worth Rs 543 Crore In September: How Investors Can Buy Them
India is preparing to test a new way of issuing and trading bonds using blockchain technology.
State-owned power financier REC is expected to issue tokenised corporate bonds worth around Rs 543 crore ($57 million) in September, according to Reuters, citing three people familiar with the matter.
This would be a pilot project and would put India alongside markets such as Europe and Hong Kong, which are already experimenting with tokenised securities. This is expected to be unveiled at an annual financial technology event in Mumbai next month.
Digital rupee will be used to buy bonds
The tokenised bonds will reportedly be bought using India's central bank digital currency (CBDC). Investors will use digital money issued by the Reserve Bank of India (RBI) to purchase these bonds, according to Reuters.
The first offering will not be open to everyone. It will be a pilot project involving only a small, selected group of investors.
Under the proposed system, investors will need two separate digital accounts to buy and hold the bonds. The first will be a digital currency wallet, provided by a bank. This wallet will contain the CBDC, or India's digital currency, which investors will use to pay for the bonds.
The second will be a digital securities wallet. This will be used to hold the tokenised bonds.
Indian depositories are developing this new system, described by the sources as “DEMAT 2.0”. The existing demat system allows investors to hold securities electronically. The proposed system would instead record these bond holdings using distributed ledger technology.
Who can trade these bonds?
The new system will also limit who can participate in the market. According to reports, subsequent trades will only be possible between participants who have compatible CBDC wallets and securities wallets.
The tokenised bonds will initially have a three-month lock-in period. This means investors will have to hold the bonds for the first three months before they can potentially sell them. After that, a secondary market could allow investors to trade the bonds with each other.
Secondary market expected by December
Indian exchanges are expected to develop a secondary market for tokenised bonds by December, according to one of the sources. The bonds, however, will not be traded on the conventional electronic book provider platform used for regular bond transactions.
