India's SEBI Demat 2.0 Pilot: $107M in Tokenized Bonds Settled via Wholesale CBDC

India's capital markets regulator has crossed a threshold that many jurisdictions are still debating. On 11 September 2026, the Securities and Exchange Board of India confirmed that three corporate issuers had collectively raised ₹1,025 crore ($107.2 million) through its Demat 2.0 pilot, settling every transaction atomically against the Reserve Bank of India's wholesale central bank digital currency. For accounting firms, auditors, and CFOs servicing Indian institutional investors, the pilot redraws the operational and financial-reporting landscape for fixed-income holdings in ways that demand immediate attention. The right crypto accounting software infrastructure needs to be in place before secondary trading phases open.

What the Demat 2.0 Pilot Actually Does

SEBI's statement describes a distributed ledger infrastructure operated by India's depositories. Corporate bonds are recorded as digital tokens on that shared ledger, but they carry the exact same ISIN, issuer obligations, coupon rate, maturity date, covenants, credit rating, and investor rights as conventional dematerialised bonds. The regulator was explicit: the pilot does not create a new class of security. What changes is the plumbing underneath.

Atomic Settlement via the RBI's Wholesale CBDC

The critical architectural feature is the connection between the depositories' distributed ledger and the RBI's Unified Market Interface. That interface links the bond leg and the cash leg so both transfer simultaneously in a single atomic transaction. If either side fails, neither completes. This eliminates the settlement risk that arises when securities and funds move on separate rails and at different times, a persistent operational concern in traditional T+1 or T+2 markets.

The cash instrument in that atomic swap is the RBI's wholesale e-rupee (e₹), meaning that what lands in bondholders' wallets on coupon or maturity dates is not a commercial bank credit but a direct liability of the central bank. That distinction matters enormously for balance-sheet classification.

The Three Inaugural Issuances

SEBI's statement names the three issuers and their respective transaction sizes:

REC Ltd., a state-backed infrastructure finance company, was first to settle on 7 September, attracting 18 investors. L&T followed two days later with a comparably sized issuance drawing four investors, while IIFL completed a smaller placement to a single investor on the same day. The concentration of investors at this stage reflects the pilot's current Phase 1 scope, which is limited to institutional participants.

The Three-Phase Roadmap and What Comes Next

SEBI has structured the pilot in three stages under its Regulatory Sandbox framework. Phase 1, now live, covers institutional issuance and primary-market settlement. Secondary trading among institutions is slated for Phase 2, and retail investor access is reserved for Phase 3. The regulator has not yet published a timeline for phase transitions, so firms should monitor SEBI circulars closely.

Visibility on the Shared Ledger

One of the more operationally significant features SEBI highlighted is ledger transparency: all authorised institutions can see bondholder details simultaneously. The regulator framed this as an efficiency gain, enabling faster servicing of coupon payments and corporate actions. From a compliance standpoint, it also means that every authorised participant's holding is visible to every other authorised participant, a consideration for firms managing proprietary-book confidentiality alongside AML obligations.

Accounting Implications for Institutional Holders

The pilot's accounting treatment is not straightforward, and firms that assume these instruments can be booked identically to conventional dematerialised bonds may encounter audit challenges. The key tensions sit across three areas.

Financial Instrument Classification under Ind AS 109

Because SEBI has confirmed that the tokenized bonds retain the same contractual cash flows as conventional bonds, the solely-payments-of-principal-and-interest test under Ind AS 109 (India's IFRS 9 equivalent) should, in most cases, be passed. That means amortised cost or fair-value-through-other-comprehensive-income classification remains available where the business model supports it. However, the digital token wrapper introduces a layer that auditors will scrutinise. Firms need a documented position paper confirming that the token is the bond, not a derivative over the bond, before year-end sign-off.

The e-Rupee Balance: Cash or Financial Asset?

The cash leg settling in wholesale e₹ is a direct RBI liability, which is conceptually analogous to holding central bank reserves. Under Ind AS 7, cash and cash equivalents require unrestricted convertibility and negligible value-change risk. Wholesale e₹ held in CBDC wallets pending deployment may satisfy those criteria, but only if the wallet infrastructure permits on-demand conversion without restriction. Firms should obtain a written confirmation from their depository on redemption mechanics before classifying e₹ balances as cash rather than as another financial asset at amortised cost. Digital asset accounting software that cannot separate CBDC wallet balances from stablecoin or token balances will produce a misclassification risk from day one.

Same-Day Proceeds and Treasury Management

SEBI's statement notes that issuers may receive proceeds on the same day as bidding, compared with the conventional two-to-three-day lag. For treasury teams, this compresses the window between commitment and deployment, which affects short-term cash-flow forecasting models. For auditors, it changes the cut-off testing approach: the traditional assumption that a bond issuance's cash proceeds arrive days after the bid date no longer holds for Demat 2.0 transactions.

Audit and Compliance Considerations

Accounting firms advising institutional bondholders and issuers should expect the following to surface in audit engagements touching Demat 2.0 positions.

Existence and Custody Assertions

The standard approach to confirming bond existence relies on depository statements and custodian confirmations. On a distributed ledger, the confirmation comes from the ledger itself, and auditors need to understand whether they can rely on that ledger record directly or whether they must still route confirmation through the depository as the system operator. SEBI's framework positions the depositories as ledger owners, which provides a familiar counterparty for confirmation purposes, but the mechanics of obtaining a signed or digitally authenticated ledger extract will need to be agreed with depositories before audit season.

AML and KYC on a Transparent Ledger

The shared-ledger visibility that SEBI cites as an efficiency feature also concentrates AML responsibilities. Every authorised institution can see who holds what. Firms must ensure that their own KYC records for co-participants are current, and that the visibility itself does not inadvertently create a screening obligation beyond what PMLA and SEBI's KYC norms currently require. India's FIU has already demonstrated its willingness to act: its recent enforcement sweep across crypto platforms underscores that Indian regulators treat AML compliance on digital asset infrastructure as a live obligation, not a future one. For broader context on how crypto AML enforcement is intersecting with digital asset accounting software requirements across jurisdictions, see our coverage of India's FIU enforcement sweep across crypto platforms.

ISIN Continuity and Record Reconciliation

SEBI confirmed that tokenized bonds retain the same ISIN as their conventional counterparts. In practice, this means a firm's portfolio management system and its crypto bookkeeping software layer both need to reference the same security identifier without double-counting. Any firm that runs a separate digital-asset ledger alongside its traditional investment accounting system is at risk of booking the same ISIN twice if data feeds are not correctly mapped at implementation.

Broader Market Structure Context

The Demat 2.0 launch places India alongside a small group of jurisdictions that have moved tokenized securities from sandbox rhetoric to settled transactions. The comparison with the EU's experience is instructive: European industry groups are currently pressing to remove the asset cap under the DLT Pilot Regime precisely because the current limit constrains real-market utility. India has launched its pilot without an equivalent cap, though the institutional-only Phase 1 restriction serves a similar gating function. Practitioners interested in how the EU framework compares can read our analysis of tokenized securities and the evolving EU DLT Pilot Regime.

What distinguishes India's approach is the direct CBDC integration at launch. Most other pilot regimes have used commercial-bank money or stablecoins as the cash leg, deferring CBDC connectivity to a later phase. Linking e₹ settlement from day one is a meaningful design choice, and it means that the accounting questions around CBDC classification are not hypothetical for Indian institutional participants. They are live.

Practical Steps for Accounting Firms and CFOs

The pilot is live, the transactions have settled, and Phase 2 is coming. Firms that wait for comprehensive SEBI guidance before updating their processes will be behind the curve. The priority actions are:

Policy and Systems Readiness

First, draft or update the firm's digital asset accounting policy to address tokenized bonds explicitly. The policy should confirm that Demat 2.0 bonds are classified under Ind AS 109 using the same criteria as conventional bonds, with a documented rationale for why the token wrapper does not alter the contractual cash flow characteristics. Second, confirm that the firm's crypto accounting software or its existing investment accounting platform can ingest ledger-sourced position data from depositories without creating duplicate ISIN records. Third, document the classification treatment for e₹ CBDC wallet balances held between settlement and redeployment, including the conditions under which they qualify as cash equivalents.

Fourth, brief the audit team now. Auditors who encounter Demat 2.0 positions for the first time at year-end, without prior planning, will face a compressed timeline to assess existence assertions, custody confirmations, and cut-off. A pre-audit planning conversation with the depository and the client's treasury team is strongly advisable for any engagement that may touch these instruments.

Source: The Block