Hong Kong’s central bank has started subsidizing the issuance of tokenized bonds

What’s new? The Hong Kong Monetary Authority (HKMA), which serves as the central bank, has begun subsidizing a portion of the cost of issuing tokenized bonds to encourage tokenization in the local capital markets. According to the November 28 announcement and accompanying guidelines, the Digital Bond Grant Scheme (DBGS) will allow issuers to cover up to 50% of the costs with a set limit.

Press release

What else is known?

“The DBGS aims to promote the development of the digital securities market and encourage broader adoption of tokenization technology in capital market transactions,” the HKMA said in a statement.

Subject to eligibility, the maximum limit is $2,5 million Hong Kong dollars ($321 184) for a full grant and two issues per company. A half grant is also allowed.

To qualify for the half grant, the bonds must be issued on a platform under the supervision of the Central Moneymarkets Unit (CMU) by a company with a “substantial Hong Kong presence.” The CMU is the HKMA unit responsible for clearing, settlement, and custody of debt securities.

To qualify for the full grant, the bonds must be issued for a minimum amount of $128,5 million to five or more investors and listed on the Stock Exchange of Hong Kong (SEHK) or a platform licensed by the financial regulator.

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DBGS began accepting applications on November 28. The program is still planned to run for three years.

It was developed as part of Project Evergreen, launched in 2021 to explore the potential of distributed ledger technology for financial markets.

HKMA executive director Eddie Yue noted that the tokenized securities segment is growing rapidly, with more than $10 billion worth of such assets issued globally over the past decade. However, some issuers still face barriers in adopting the technology, and DBGS is designed to provide additional incentives.

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Under the Green Bond program, the Hong Kong government issued $100 million worth of tokenized green bonds last February.

Earlier this month, Hong Kong’s largest neo-bank, ZA Bank, launched a service for retail users to directly purchase BTC and ETH for fiat.