Authorities in Hong Kong has launched a tokenized green bond. According to the announcement, the tokenized offering will run under the government green bond programme. Reportedly, the tokenized bond is worth HK$800 million.
Occasioned by this development, Hong Kong has emerged as the first to issue a government green bond across the globe. Meanwhile, according to the announcement, the authorities said it approved four banks to distribute the tokenized bond. These banks include Bank of China (Hong Kong), HSBC, Crédit Agricole CIB, and Goldman Sachs. Worthy of note that the Bank of China (Hong Kong) and HSBC would also act as custodians to investors of the bond. More so, it also announced the Central Moneymarkets Unit (CMU) of the Hong Kong Monetary Authority (HKMA) as the clearing and settlement system for the bond. This unit reportedly harnessed Goldman Sachs’ tokenisation platform, GS DAPTM.
According to the announcement, the primary issuance of the bond was settled based on a delivery-versus-payment (DvP) basis between securities tokens and cash tokens. Remarkably, securities tokens represents beneficial interests in the bond while cash tokens indicates a claim for HKD fiat against the HKMA, on a T+1 basis on a private blockchain.
Hong Kong to automate all processes of the bond in a private blockchain
Meanwhile, the tokenized bond, according to the Hong Kong authorities, has a year maturity. As revealed, the government plans to automate all processes enveloped in its lifecycle in the private blockchain. These processes include coupon payment, settlement of secondary trading and maturity redemption.
Notably, HKMA maintained that the offering of the tokenized bond illustrates the flexibility of Hong Kong’s legal and regulatory environment to innovative ways of issuing bonds. The agency plans to publish a whitepaper in the future to explain the experience gotten from the issuance. Through the whitepaper, it will also identify the necessary blueprint for the continuous issuance of tokenized bonds in Hong Kong.
Worthy of note that Paul Chan, the Financial Secretary made some comments as regards the bond issuance. Chan reflected on the proactive efforts of government in Hong Kong to enhance the usage of innovative technologies in the finance sphere. The official added that these new technologies help to ensure the productivity, transparency and security of financial transactions. Further, Chan referenced the policy statement by the authorities on the development of virtual assets. According to him, the contents of this policy statement indicates the readiness of the authorities to embrace financial innovations. Similarly, he noted that the success of the bond issuance remains a significant milestone for the region. According to him, it demonstrates the strength of Hong Kong in harnessing the prospects of the bond market, green and the fintech spheres.