Hong Kong boosts digital asset hub bid with $750M digital green bonds sale

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The Hong Kong government has confirmed the sale of $750 million worth of digital green bonds nearly one year after Project Evergreen, the region’s first iteration of digital bonds.

The digital bonds, to be issued across four currencies, have gathered significant steam in the special administrative region since its launch. The four currencies deployed by officials include the U.S. dollars, euros, yuan, and the Hong Kong dollar, described as an upgrade from its 2023 offering.

Apart from a slight disparity in sales figures and currencies, Hong Kong’s latest digital bond bears similarities with its previous iteration. The new offering relies on the same banks for issuance, but a distinction can be gleaned from the tokenization platform used by both offerings.

While the previous issuance made use of Goldman Sachs’ (NASDAQ: GS) GS DAP tokenization platform, the second digital bond issuance turned to 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 the issuance. The bond will rely on blockchain for all aspects of operation, including derivation and recovery, with the Hong Kong Monetary Authority (HKMA) noting the utility of the technology for digital bonds.

“It also showed the potential in DLT to enhance efficiency, liquidity, and transparency in bond markets,” said the HKMA in a previous report summarizing Project Evergreen.

Experts have said that using blockchain for bond offerings allows faster settlement times and eliminates third parties in the value chain.

Hong Kong officials are also pursuing interoperability with traditional financial institutions, although there is little information on a blueprint to link both systems. There are suggestions that the HKMA will mirror the pattern of the SDX Exchange and D-FMI’s interlinking of traditional central securities depositories (CSDs) with blockchain.

Going forward, the bond’s issuance is expected to occur simultaneously with the HKMA’s Green Finance Week slated for the end of February.

Scrambling for tokenization guidelines

Ahead of a concerted push toward tokenization, Hong Kong’s Securities and Futures Commission (SFC) has unveiled two circulators to guide activities and protect consumers in the space.

Firms offering tokenization services are expected to reduce technology risks associated with blockchain use, including forking and security breaches. To ensure uniformity, the SFC describes tokenized assets as essentially the same as traditional securities, bringing them within the purview of Hong Kong’s capital market rules.

“The SFC sees the potential benefits of tokenization to the financial markets, particularly in increasing efficiency, enhancing transparency, reducing settlement times, and lowering costs for traditional finance, but it is also aware of the new risks arising from the use of this technology,” said the securities regulator.

Watch: Tim Draper talks tokenization with Kurt Wuckert Jr.