Source : INDIA TODAY NEWS
India is set to launch its first tokenised corporate bond issue next month, testing whether blockchain technology can make bond transactions faster and enable near-instant settlement.
The pilot issue will be launched by state-owned power financier REC and will be worth less than Rs 500 crore ($57 million), according to three people familiar with the matter, reported Reuters.
The move will put India alongside markets such as Europe and Hong Kong, which are also using blockchain technology for issuing and settling bonds.
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REC TO LAUNCH PILOT ISSUE
The tokenised bonds are expected to be unveiled at an annual financial technology event in Mumbai next month, one of the sources said.
The pilot will be offered only to a select group of investors. Reuters could not establish who the investors will be.
The Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI) are working together on the initiative, the sources said. Discussions are still ongoing and details of the framework could change.
The RBI, Sebi and REC did not respond to requests for comment.
HOW WILL TOKENISED BONDS WORK?
Tokenised bonds are securities whose ownership, issue, trading and settlement are recorded digitally on a blockchain or distributed ledger.
The technology can allow transactions to be completed almost instantly, compared with the traditional process of recording and settling bond transactions.
For the planned issue, investors will need access to two digital accounts.
One will be a wholesale digital currency wallet provided by a bank. The second will be a new electronic securities wallet for holding the tokenised bonds.
CBDC TO BE USED TO BUY BONDS
India’s central bank digital currency (CBDC) will be used to purchase the tokenised bonds, according to one of the sources.
Indian depositories are developing a new electronic wallet, described as DEMAT 2.0, which will record bond holdings on a distributed ledger technology chain.
This means investors will need compatible CBDC and securities wallets to take part in subsequent trades.
One of the sources said that subsequent trades would be possible only between participants holding both compatible CBDC and securities wallets.
THREE-MONTH LOCK-IN
The tokenised bonds will have an initial lock-in period of three months, according to the sources.
Stock exchanges are expected to develop a secondary market for these bonds by December. This would allow investors to trade the securities after the initial lock-in period.
The bonds will not be traded on the conventional electronic book provider platform, the sources said.
Although the planned issue is relatively small, it will be closely watched as India tests the use of blockchain technology in its bond market.
The pilot will allow regulators and market participants to test a new system involving digital securities wallets, CBDC payments and blockchain-based settlement.
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SOURCE :- TIMES OF INDIA
