Hong Kong’s central bank, the Hong Kong Monetary Authority (HKMA), has begun subsidizing some of the costs of issuing tokenized bonds to encourage tokenization in its capital markets.
According to a Nov. 28 statement and accompanying guidelines, the HKMA’s Digital Bond Grant Scheme (DBGS) will subsidize up to 50% of the “eligible expenses” for such digital bond issuances, up to a certain amount.
“The DBGS aims to promote the development of the digital securities market and encourage broader adoption of tokenization technology in capital market transactions,” HKMA said.
Tokenization involves transforming an asset into digital tokens on a blockchain. Source: Moneta. holdings
Subject to eligibility requirements, there’s a maximum cap of $321,184 (2.5 million Hong Kong dollars) for a full grant and two issuances per company. A half grant is also available.
The DBGS began accepting applications on Nov. 28. The program will run for an initial period of three years.
To qualify for the half grant, the bond must be issued digitally on a platform operated by the Central Moneymarkets Unit (CMU) and issued in Hong Kong by a company with a “substantial Hong Kong presence.”
The full grant requires the bonds to be issued at a minimum size of $128.5 million to five or more investors and listed on the Stock Exchange of Hong Kong (SEHK) or a platform licensed by Hong Kong’s financial regulator.
In a Nov. 28 update on Project Evergreen, commissioned in 2021 to explore distributed ledger technology for financial markets, the chief executive of the HKMA, Eddie Yue, wrote that the DBGS came as a direct result of that research.
According to Yue, some bond issuers still face hurdles in adopting tokenized bonds, which is why the HKMA decided to create additional incentives to help “encourage take-up.”
Hong Kong’s government issued $100 million in tokenized green bonds under its Green Bond Programme on Feb. 16, 2023.
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“Tokenisation has since gained much momentum. So far, market estimates suggest that over $10 billion worth of tokenized bonds in total notional value have been issued in the last decade globally,” Yue wrote.
Meanwhile, a Nov. 28 Financial Times report outlined how Hong Kong authorities are considering crypto gains tax exemptions for hedge funds, private equity and family investment vehicles to strengthen its position as a leading crypto financial hub.
The proposal is open for a six-week consultation and includes exemptions for investments in private credit, overseas property and carbon credits.
Hong Kong’s biggest virtual bank, ZA Bank, also recently launched a new service on Nov. 25, allowing retail users to buy and sell Bitcoin (BTC) and Ether (ETH) directly using fiat.
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