Hong Kong’s Plan to Dominate the Tokenized Bond Market

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Breaking Barriers: Hong Kong’s Plan to Dominate the Tokenized Bond Market

Written by Aaron S.,

Editor-In-Chief

Last Updated: November 29, 2024

Key Takeaways

Hong Kong’s DBGS offers up to $321,184 to cover costs for tokenized bonds, aiming to boost adoption in digital finance markets;
The program includes full and half grants, with eligibility based on bond size, investors, and listing criteria;
Launched from Project Evergreen, DBGS tackles tokenization hurdles to attract issuers and innovate financial markets.

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Breaking Barriers: Hong Kong’s Plan to Dominate the Tokenized Bond Market

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On November 28, the Hong Kong Monetary Authority (HKMA), Hong Kong's central bank, introduced the Digital Bond Grant Scheme (DBGS) program to encourage the use of tokenized bonds in its financial markets.

The DBGS is designed to cover up to 50% of eligible expenses for companies issuing tokenized bonds, with a maximum subsidy of about $321,184 (2.5 million Hong Kong dollars).

Companies can apply for either a full or half grant, depending on the nature of their issuance.

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The full grant requires bonds to meet specific criteria, including a minimum issuance size of $128.5 million, distribution to at least five investors, and listing on either the Stock Exchange of Hong Kong or another platform licensed by local regulators.

For companies opting for the half grant, the requirements are less strict—the bonds must be issued digitally through the Central Moneymarkets Unit (CMU) and issued by a company with a strong presence in Hong Kong.

Applications for the program will be accepted for an initial period of three years. During this time, the HKMA will observe how the market responds and may refine the program based on feedback.

In the announcement, the HKMA stated:

The DBGS aims to promote the development of the digital securities market and encourage broader adoption of tokenisation technology in capital market transactions.

The DBGS was born out of Project Evergreen, a research initiative launched in 2021 to explore how distributed ledger technology could be applied in financial markets.

The HKMA’s push into tokenization reflects its growing interest in digital innovation, but the story doesn’t stop there. Recently, ZA Bank, Hong Kong’s largest virtual bank, has integrated digital assets like Bitcoin and Ethereum into its services. How is this reshaping the city’s financial landscape? Read the full story.