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Authored by: Simon Deane and Natalie Chan
On 16 February 2023, with assistance from the HKMA, the Hong Kong Government offered HK$800 million of tokenised green bonds in Hong Kong. It was also the world’s first tokenised green bond issued by a government.
Tokenising a bond involves recording the beneficial interests in a bond using distributed ledger technology, as opposed to traditional computerised book entries. This does not only change the format of securities bookkeeping, but also facilitates the trading of the bonds on a single digital platform at a lower cost. Put simply, selling tokenised bonds now only involves moving the bond and cash tokens between the e-wallets of buyers and sellers on a single platform instantly without any settlement delay and other risks associated with traditional settlement methods.
As the first tokenised bond is governed by Hong Kong law, the offering demonstrates that Hong Kong’s legal and regulatory environment is capable of accommodating innovative forms of bond issuances. To encourage wider adoption of tokenisation in the Hong Kong market, the HKMA will soon issue a whitepaper to summarise the experience gained from this issuance, set out the next steps and provide a blueprint for issuing other tokenised bonds in Hong Kong.
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