India’s securities watchdog approves blockchain tech for NCDs

August 28, 2021

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To make the record-keeping process related to securities traded in the market more secure, the Securities and Exchange Board of India (SEBI) on Wednesday asked depositories to use distributed ledger technology — popularly called blockchain technology — to record and monitor credit ratings of non-convertible debentures (NCDs) and creation of charges on these securities like pledges, among others.

The distributed ledger technology has the potential to provide a more resilient system than the traditional centralised databases, the markets regulator said in a statement. It offers better protection against different types of cyberattacks because of its distributed nature, which removes the single point of attack possibility, it said.

Sebi said that a platform for security and covenant monitoring systems, hosted by depositories, is being developed. Usage of blockchains for these purposes on the new platform will be effective April 1, 2022.

Among others, the new system will help in continuous monitoring of credit rating of the NCDs by agencies. “A system using blockchain technology for non-convertible securities along with the underlying assets would be created and all charges and asset valuation transactions shall be recorded by the respective entities including issuers, debenture trustees and credit rating agencies,” Sebi said.

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