SEBI plans pilot project for tokenisation of corporate bonds, rollout may take 6-9 months
Mumbai, May 26
Securities and Exchange Board of India Chairman, Tuhin Kanta Pandey on Monday said the Securities and Exchange Board of India has decided to launch a pilot project for tokenisation of corporate bonds using Distributed Ledger Technology, with implementation expected to take around six to nine months.
Speaking to the media on the sidelines of the CareEdge Debt Market Summit in Mumbai, the SEBI Chairman said the market regulator has initiated a pilot stage project to examine whether corporate bonds can be traded and settled through tokenisation-based systems using DLT technologies.
"This is a pilot project that we have decided to initiate on use of the DLT, the digital ledger technology, for tokenization of corporate bonds," Pandey said.
According to him, the pilot project will first be implemented on a limited scale before broader adoption is considered.
He stated that DLT technologies are already being used in certain areas such as depositories and covenant monitoring, but SEBI now wants to evaluate whether the same technology can improve the functioning of the corporate bond market.
Pandey said tokenisation could help improve liquidity in the corporate bond market and enable more instantaneous and automated settlements.
"Once you do that there will be a greater possibility of more liquidity and instantaneous autonomous settlements," he said.
The SEBI Chairman added that while tokenisation offers several benefits, regulators also need to assess the risks linked to such technologies, especially future risks emerging from developments in quantum technologies.
He noted that the regulator plans to bring together all stakeholders to build a technological and operational framework for the pilot project.
Pandey clarified that corporate bonds are already being traded under existing systems and the proposal is aimed at exploring whether DLT and tokenisation can make the process more efficient.
"It will take some time as I said that we have decided.... But it will take 6 to 9 months to see various stages," he added.
On corporate bond-related discussions with the Reserve Bank of India, Pandey said the RBI has already issued draft guidelines related to the matter and is expected to release the final framework shortly.
He added that exchanges and SEBI are prepared to move ahead once RBI approvals are received.
"So far as our exchanges are concerned and SEBI is concerned, we are quite ready to launch it as soon as the RBI clears it," Pandey said.
Commenting on Taiwan's stock market capitalisation overtaking India, the SEBI Chairman said valuation trends are currently being influenced globally by strong investor interest in artificial intelligence and semiconductor-related companies.
He said companies linked to AI infrastructure, chips, memory systems and electronics are attracting significant investor flows globally, leading to higher market valuations in certain countries.
Pandey noted that India's market is highly diversified, while markets such as Taiwan are more concentrated around a few major technology companies that are critical to the global electronics supply chain.
— ANI
Reader Comments
This is a very forward-looking move by SEBI. DLT can bring transparency and reduce settlement times. However, I'm a bit concerned about the quantum computing risks he mentioned. If the technology is not future-proof, we might face security issues down the line. Still, good to see India leading in fintech innovation! 🇮🇳
As someone who works in financial services, I've seen how slow corporate bond settlements can be. Tokenisation could be a game-changer for liquidity. But SEBI needs to ensure the regulatory framework is robust - we don't want a crypto-style mess in the bond market. The 6-9 month timeline seems aggressive for something this complex. Let's hope they get it right.
Interesting! Corporate bonds have always been an "HNI-only" club in India due to high ticket sizes. If tokenisation really works, we retail investors could finally participate with smaller amounts. But I'm skeptical - the implementation will need strong investor education. SEBI should also think about exit options. Just because it's tokenised doesn't mean it's liquid.
All this talk about tokenisation and DLT but the real issue is the lack of retail participation in corporate bonds. Even if the technology works, who will buy them? The government should also work on making bond yields more attractive. Otherwise, this is just a technological solution looking for a problem. 🤷♂️
Good to see SEBI thinking ahead! The mention of quantum risk shows they're not just blindly adopting tech. But I wonder how this will work
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