India’s market regulator is moving forward with a tokenized corporate bond pilot project to test whether distributed ledger technology can improve liquidity and settlement efficiency in the country’s bond market.
Speaking on the sidelines of the CareEdge Debt Market Summit in Mumbai on May 26, Securities and Exchange Board of India Chairman Tuhin Kanta Pandey said the regulator has approved a pilot initiative to explore the use of distributed ledger technology (DLT) in corporate bond trading and settlement.
BREAKING: 🇮🇳 SEBI launches pilot of tokenized corporate bonds to improve transparency and increase investor participation. pic.twitter.com/G6ogMUmcW2
— Crypto India (@CryptooIndia) May 27, 2026
In a media interaction, Pandey said the project will initially operate on a limited scale before a decision is taken to expand the framework across the market. According to the SEBI chairman, the implementation process could take six to nine months as regulators and market participants will go through multiple operational stages.
At the same time, the proposal has refocused India’s approach to blockchain technology, especially as the Indian government continues to maintain highly restrictive policies towards retail crypto transactions while encouraging selected institutional use of DLT infrastructure.
Pandey said that while certain DLT-based systems are already in use in areas such as covenant monitoring and custodians, SEBI now wants to study whether tokenization can solve long-standing inefficiencies in India’s corporate bond market.
India’s corporate bond market is estimated at around Rs 59,000 crore, as per industry estimates cited in additional context, but secondary market participation continues to be low as many institutional investors hold bonds until maturity. Limited retailer participation has also reduced price discovery and trading activity across the segment.
In the proposed pilot, tokenization will transform traditional fixed income products into blockchain-based digital tokens capable of automated and near-instantaneous settlement. In additional context, it noted that regulators are also assessing whether fractional ownership structures can lower barriers to entry for small investors.
Regarding the expected benefits, Pandey said tokenization could improve liquidity and support “instant autonomous settlement” within the bond market ecosystem.
RBI framework expected soon
During the event, Pandey said that the Reserve Bank of India is separately working on draft guidelines related to the framework and will announce the final standards soon. He added that SEBI and the stock exchanges are ready to proceed with the process once the central bank’s approval is completed.
The SEBI Chairman also acknowledged the risks associated with this technology, particularly concerns related to future advances in quantum computing. According to Pandey, regulators should investigate whether the development of quantum systems could ultimately impact the cryptographic security used in DLT-based infrastructure.
India to rein in crypto sector
Although India has opened the door to blockchain use cases in regulated financial markets, the country’s attitude towards private cryptocurrencies remains tightly controlled by taxation and compliance rules.
Under India’s current virtual digital asset tax regime, profits from virtual currency transactions are taxed at a flat rate of 30%, with 1% tax withheld on each transaction. Existing rules also do not allow investors to offset losses in cryptocurrencies against profits or ordinary income.
Meanwhile, virtual currency exchanges operating in India must register with the Indian Financial Intelligence Bureau and comply with anti-money laundering law requirements, including strict customer identification procedures and transaction reporting requirements.
Recent tax reporting regulations have further increased oversight. Digital asset platforms will be required to submit user-level transaction data directly to the Income Tax Department, but late or inaccurate reporting could result in fines.
India is also in the process of integrating with the OECD’s Cryptoasset Reporting Framework. This is a global data sharing system that allows authorities to receive information on offshore digital asset holdings belonging to Indian residents.
In contrast, the corporate bond tokenization trial will operate within a regulatory-backed environment with permission jointly overseen by SEBI and RBI, separating the effort from public blockchain networks commonly associated with cryptocurrencies such as Bitcoin and Ethereum.
