India to Pilot Tokenized Corporate Bonds Using Digital Rupee

India is preparing to launch its first tokenized corporate bond pilot next month, bringing blockchain-based securities issuance and the country's digital rupee together in a transaction that could test how tokenization changes the infrastructure of India's bond market.

According to Reuters, State-owned power financier REC is expected to issue less than 5 billion rupees ($57 million) of tokenized bonds, with India's central bank and securities regulator working jointly on the initiative, according to three people with direct knowledge of the plans cited by Reuters.

The pilot is expected to be unveiled at an annual financial technology event in Mumbai next month and will initially be restricted to a select group of investors.

The development puts India alongside financial centers including Hong Kong and Europe, where financial institutions and market infrastructures are already moving tokenized bonds from experimentation toward live issuance and settlement.

But India's approach is notable for another reason: the bond will be purchased using India's wholesale central bank digital currency (CBDC).

India Links Tokenized Bonds to the Digital Rupee

Under the proposed framework, investors will need access to two digital accounts.

The first will be a wholesale digital currency wallet provided by a bank, used to hold and transfer India's digital rupee.

The second will be a new electronic securities wallet being developed by India's depositories, which will record ownership of the tokenized bonds on distributed ledger technology.

The system, referred to as DEMAT 2.0, would effectively place the securities ledger itself on DLT rather than simply using blockchain as an additional layer around conventional securities infrastructure.

Participants would need both compatible CBDC and securities wallets to trade the bonds.

The structure therefore goes beyond tokenizing the asset alone.

India is testing tokenized securities and tokenized settlement money as two connected components of the same transaction.

That is potentially more significant than simply issuing a bond on blockchain.

India Is Following a Global Shift in Bond Tokenization

India's experiment comes as other major financial centers move toward integrating tokenized fixed-income instruments into established capital markets.

In January, Societe Generale-FORGE and Swift completed a tokenized bond settlement involving both fiat and digital currencies, using the EUR CoinVertible stablecoin. The transaction covered issuance, delivery-versus-payment settlement, coupon payments and redemption across multiple platforms.

Hong Kong has taken an even broader approach.

The Hong Kong Monetary Authority has issued more than HK$6.8 billion ($868 million) in tokenized bonds, while HSBC recently completed its first blockchain-native issuance of tokenized U.S. dollar structured notes for institutional investors.

Unlock Blockchain previously reported on Abu Dhabi Securities Exchange's first digital-native blockchain bond, issued by First Abu Dhabi Bank in partnership with HSBC. The July 2025 transaction marked the first DLT-based bond listed on a public exchange in the MENA region.

The pattern is increasingly clear: tokenization is moving beyond the question of whether bonds can be issued on blockchain.

The focus is shifting toward how blockchain-based securities can connect to the cash, custody, settlement and secondary-market infrastructure that already supports global capital markets.

The CBDC Connection Matters

India's pilot adds another layer to that evolution.

Using the digital rupee to purchase the tokenized bonds creates a controlled environment in which the asset and settlement money are both digitally native.

That could allow India to test whether delivery-versus-payment can be made more direct, potentially reducing settlement risk and the number of reconciliation steps required between securities and cash systems.

It also gives the Reserve Bank of India an opportunity to examine how wholesale CBDC infrastructure interacts with tokenized financial assets in an actual capital-markets transaction.

This is consistent with a broader direction in institutional tokenization.

The BIS and financial-market infrastructures have increasingly focused on connecting tokenized commercial assets with digital forms of settlement money, rather than treating tokenization as an isolated securities-recording exercise.

Singapore's Project Guardian highlighted a similar model, where tokenized bonds and tokenized deposits were combined in a permissioned liquidity pool to explore blockchain-based wholesale funding and lending.

India's approach differs because its settlement asset is a central bank liability rather than a commercial bank deposit.

That distinction makes the pilot particularly relevant to the future design of institutional digital markets.

The Real Test Is the Secondary Market

The REC bonds will have an initial three-month lock-in period, while exchanges are expected to develop a secondary market for the securities by December.

That may prove more important than the initial issuance itself.

A blockchain can make ownership records and settlement more efficient, but efficiency does not automatically create liquidity.

The secondary market will show whether tokenized bonds can move beyond a controlled pilot and become functioning capital-market instruments.

This has been a recurring challenge for tokenization. Institutions can demonstrate that assets can be issued and settled on distributed ledgers, but achieving sufficient participation, interoperability and trading liquidity is considerably harder.

India's decision to keep the pilot outside the conventional electronic book provider platform creates an opportunity to test that alternative infrastructure on a limited scale before potentially connecting it more closely with the existing market.

The Real Question Is Whether India Can Scale It

At less than $57 million, the REC issuance is small relative to India's overall bond market. Its significance lies instead in what the pilot puts together: a tokenized security, wholesale CBDC settlement, DLT-based securities custody and a planned secondary market.

That combination makes the experiment more than another blockchain bond issuance.

The harder test will come after issuance.

If India can demonstrate that tokenization improves not only settlement speed but also the broader lifecycle of a security — including custody, trading and liquidity — the model could provide a foundation for larger-scale digital capital markets.

The real question is no longer whether a bond can be put on blockchain. It is whether blockchain can make the entire bond lifecycle — from issuance and settlement to trading — materially better.

That is the part of India's experiment worth watching.