Hong Kong strengthens bid to become digital asset hub with $750 million digital green bond sale
The Hong Kong government has confirmed the sale of $750 million worth of digital green bonds, nearly a year after Project Evergreen, the region’s first digital bond.
The digital bond, which will be issued in four currencies, has been very popular in the special administrative region since its launch. The four currencies deployed by officials include the US dollar, euro, yuan and Hong Kong dollar, which are described as upgrades from the 2023 proposal.
Aside from some differences in sales figures and currency, Hong Kong’s latest digital bond is similar to its predecessor. Although the new service relies on the same banks for issuance, differences can be found in the tokenization platform used by both services.
While the previous issuance utilized Goldman Sachs’ (NASDAQ: GS) GS DAP tokenization platform, the second digital bond issuance utilized HSBC Orion’s (NASDAQ: HSBC) blockchain solution.
HSBC, Goldman Sachs, Credit Agricole (NASDAQ: CRARF), Bank of China (Hong Kong) (NASDAQ: BACHY), and UBS (NASDAQ: UBS) are participating in this issuance. The bonds will rely on blockchain for all aspects of their operations, including derivation and recovery, with the Hong Kong Monetary Authority (HKMA) citing the technology’s utility for digital bonds.
“It has also demonstrated the potential of DLT to improve efficiency, liquidity and transparency in bond markets,” the HKMA said in a previous report outlining Project Evergreen.
Experts said that using blockchain for bond issuance could lead to faster settlement times and remove third parties from the value chain.
Hong Kong officials are also pursuing interoperability with traditional financial institutions, but there is little information about a blueprint to connect the two systems. There are suggestions that the HKMA will mirror the interconnection pattern of traditional central securities depositories (CSDs) and blockchains on the SDX Exchange and D-FMI.
Going forward, the bond issuance is expected to coincide with the HKMA Green Finance Week scheduled for the end of February.
Mixing up tokenization instructions
Ahead of the concerted push towards tokenization, Hong Kong’s Securities and Futures Commission (SFC) unveiled two circular mechanisms to guide activity in the space and protect consumers.
Companies providing tokenization services are expected to reduce the technical risks associated with blockchain use, including forks and security breaches. To ensure uniformity, the SFC describes tokenized assets as essentially identical to traditional securities, bringing them within the scope of Hong Kong capital market rules.
“While the SFC sees the potential benefits of tokenization for financial markets, including increased efficiency, greater transparency, faster settlement times and lower costs of traditional finance, we also recognize the new risks arising from the use of this technology. “, the securities regulator said.
Watch: Tim Draper talks with Kurt Wuckert Jr. about tokenization.
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