In a bid to modernise the domestic corporate bond market, the Securities Exchange Board of India (SEBI) has announced plans roll out a pilot project for tokenisation of corporate bonds using Distributed Ledger Technology (DLT). The project will be implemented within six to nine months.
Talking on the sidelines of an event in Mumbai, SEBI Chairman Tuhin Kanta Pandey said that the project is currently at a pilot stage, and will first be analysed to check whether the primary securities can be traded through the tokenisation system using DLT.
DLT technology to aid instantaneous settlements
Elaborating on the DLT system, he noted that these technologies are already deployed in areas like depositories and covenant monitoring. Pandey said that the markets regulator wants to examine whether they can reap the benefits of tokenisation in the corporate bond market, adding that the technology will improve liquidity conditions and help with instantaneous and autonomous settlements.
“Once you do that, there will be a greater possibility of more liquidity and instantaneous autonomous settlements,” ANI quoted Pandey as saying. However, he added that the risks associated with the tokenisation method, especially the ones linked to the quantum side, should also be taken onboard.
The markets regulator chairman added that SEBI plans to bring all stakeholders together to show them a technological and operational model of the same.
He clarified that corporate bonds are already being traded under certain existing systems, and SEBI is exploring ways to see whether DLT can be used in the tokenisation method to help make the process more efficient.
Talking about the timeline of the project, he said, “It will take some time as I said that we have decided…. But it will take 6 to 9 months to see various stages.”
Final framework to be released shortly
Pandey stated that the Reserve Bank of India (RBI) has already issued draft guidelines related to the matter, and the final framework is expected to be released shortly. The project will be launched as soon as SEBI and the exchanges receive approval from the central bank.
“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.
Indian markets more diversified
Commenting on Taiwan’s stock market valuation overtaking India, he said investor interest is currently towards companies related to artificial intelligence and its related infrastructure.
He noted that market valuations tend to change on account of exceptional investor interest, stating that Indian markets are very diversified, while Taiwanese markets are concentrated around a few major technology companies that are very crucial to the global electronics supply chain.
(With inputs from news agency ANI)