Tokenization, CBDCs poised to increase Hong Kong’s GDP by $20.4 billion: study

Getting your Trinity Audio player ready...

Experts have projected that Hong Kong’s gross domestic product (GDP) may significantly grow in the coming years, buoyed by tokenization and a potential pivot to central bank digital currencies (CBDCs).

The predictions come on the heels of a recently completed e-HKD pilot involving the trio of Boston Consulting Group (BCG), Hong Kong Telecom, and ZA Bank on tokenized real-world assets. The study, probing the feasibility of tokenizing real estate and other assets, demonstrated potential in improving the digital economy of the Special Administrative Region (SAR).

In its submission, BCG surmised that the combination of digital assets would lead to a significant spike in the region’s GDP. BCG’s predictions factored the stablecoins, tokenized deposits, tokenization of real-world assets, and the incoming e-HKD to arrive at the hypothesis.

BCG quantifies the growth as a HK$160 billion (US$20.5 billion) addition to Hong Kong’s economy by 2032, rehashing similar projections made by other entities. The forecast 0.5% growth is not set in stone, with BCG noting that several factors could impede its projections, including an absence of necessary infrastructure to support tokenization in the near term.

Apart from infrastructure, BCG points out that Hong Kong’s administrators will be required to show keen regulatory support for digital currencies and tokenization drives.

BCG’s report hypothesizes that several areas are bound to trigger the growth of the local economy, beginning with the unlocking of liquidity in assets. Tokenization, particularly in real estate, could provide up to $29 trillion in assets.

Other potential areas for growth include money distribution, full-scale support for Web3
initiatives, and an exploration of cross-border transactions to trigger economic growth.

Hong Kong is moving ahead with its CBDC plans, completing the first phase of its e-HKD pilot. Currently, the central bank is preparing for the second phase of studies focusing on programmability, atomic settlement, and tokenization.

While CBDCs have reached an advanced stage with Project Ensemble, Hong Kong has notched wins with stablecoins and tokenized deposits via robust rulemaking and innovative experiments.

Hong Kong’s attempt at tokenizing real estate

BCG’s pilot involved using blockchain technology to tokenize real estate and hypothetical e-HKD for settlements. Participants were expected to fulfill certain conditions using programmability features before spending the e-HKD with transactions conducted both on-chain and off-chain.

Tokenization and settlements relied on Polygon’s publicly distributed ledger, while credit assessments were conducted off-chain.

However, BCG submitted that several issues could clog the process of tokenizing real-world assets. The pilot noted a slew of legal issues ranging from the need for the token to be a bearer instrument in line with existing legislation and the hassle of registering every transaction with the off-chain land registry.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: CBDCs are more than just digital money