Mumbai, September 10: Capital markets regulator Securities and Exchange Board of India (SEBI) on Thursday launched a pilot project for the tokenisation of corporate bonds under its Demat 2.0 initiative, seeking to test whether distributed ledger technology can make securities settlement and servicing faster, more integrated and programmable.
Three issuers have already issued tokenised corporate bonds under the pilot in recent days, SEBI Chairman Tuhin Kanta Pandey said while speaking at the Global Fintech Fest 2026.
The initiative is being led by depositories CDSL and NSDL, with support from stock exchanges BSE, NSE and MSEI, besides banks, issuers, investors, NPCI and other regulators.
The pilot will examine the use of distributed ledger technology (DLT) to bring the security and settlement legs of transactions closer together, potentially enabling faster settlement and greater automation in asset servicing.
“The broader significance is that we are exploring a market architecture where securities, settlement and servicing can become more integrated and programmable,” Pandey said.
Tokenised securities, CBDC in focus
The pilot combines tokenised securities with digital settlement assets through the central bank digital currency (CBDC) and smart-contract functionality, while continuing to operate within India’s existing securities market infrastructure.
A key priority will be ensuring legal certainty over ownership as new technology is introduced into the market, Pandey said.
Globally, financial markets are experimenting with tokenisation and DLT to streamline trading, settlement and post-trade processes. India has also witnessed rapid technology-led growth in its securities market through digital onboarding, electronic payments and clearing and settlement systems.
Pandey said technology has helped widen participation and improve the security and traceability of transactions, including the ability to identify the ultimate investor.
However, greater digitisation and interconnection also bring new risks.
“As markets become larger, faster and more interconnected, regulatory risk also changes. A vulnerability in one part of the ecosystem can travel much faster,” Pandey said.
He stressed the need for resilient market infrastructure capable of identifying and addressing emerging risks as financial markets adopt increasingly sophisticated technologies.
SEBI seeks predictive supervision
The SEBI chairman said regulators would also need to upgrade their supervisory capabilities in line with technological advances across financial markets.
Supervisory technology, or SupTech, could play a greater role by using data, analytics and artificial intelligence to identify patterns and risks that may not be apparent through conventional supervisory mechanisms.
“At SEBI, we are moving in this direction, with the aim of making supervision increasingly predictive and capable of identifying emerging risks early,” Pandey said.
He said the regulatory challenge was to allow innovation to scale without allowing risks to grow at the same pace.
The issue is becoming increasingly important as agentic artificial intelligence, tokenisation and quantum computing gain relevance in financial markets.
According to Pandey, these technologies could bring greater intelligence, programmability and computing power to the financial ecosystem, but would simultaneously require regulators to develop appropriate safeguards.
Quantum threat requires early preparation
Pandey also highlighted the longer-term risks that quantum computing could pose to existing cryptographic systems used across financial infrastructure.
Although the quantum threat is not yet considered an immediate operational challenge, he said preparations for the transition to quantum-safe systems should begin well in advance.
The transition would involve identifying critical systems, developing crypto-agility and undertaking a phased move towards post-quantum cryptography, he said.
“As we explore newer possibilities, we must also prepare for risks arising from the same technological transformation,” Pandey said.
The SEBI chief emphasised that India’s approach would be to balance rapid technological adoption with safeguards aimed at preserving the resilience, security and stability of the country’s increasingly large and interconnected securities market.
