Bond markets carry their friction in the settlement layer, where custodians, clearing houses, and registries must reconcile ownership records on each trade, typically over one to two sessions. India's Securities and Exchange Board, SEBI, has begun moving that process onto a token-based architecture, issuing $107 million in bonds through a pilot it has designated Demat 2.0.
The mechanism behind the program name
The "Demat" framing is precise. India's existing dematerialized securities system already removed paper certificates from equity and fixed-income markets, replacing them with electronic registry entries held through central depositories. Demat 2.0 advances the model: ownership and transfer logic are encoded in the token itself, rather than maintained as a mutable record updated downstream of each transaction.
In the traditional model, settlement finality follows a sequence of clearing steps. In the tokenized model, transfer and finality can in principle coincide. That compression is what the architecture is designed to test at the $107 million scale SEBI has set for the pilot.
The trust question shifts as well. A conventional bond settlement relies on the depository's registry as the authoritative record; a tokenized bond places that authority in the token protocol and the chain it runs on. The controlled scope of the pilot is the environment in which SEBI begins measuring how that shift performs under live-market conditions.
What the next phases will require
The current phase operates without secondary trading and remains closed to retail investors. SEBI said later phases of Demat 2.0 will introduce secondary market functionality and open the program to retail participants.
Secondary trading is the more demanding expansion. A primary issuance settles once; a functioning secondary market requires continuous clearing across counterparties with varying custody arrangements and latency tolerances. Every new participant adds a node to the clearing graph.
Retail access carries its own infrastructure weight. Custody at that scale requires onboarding systems, key management, and settlement guarantees that an institutional pilot can defer. How SEBI structures those guardrails will determine whether Demat 2.0 reaches the transaction volume at which the token architecture's efficiency advantages become economically material.
SEBI has not given a timeline or a target issuance figure for subsequent phases.