Government-issued tokenized bonds
The Hong Kong Special Administrative Region government announced today that it has successfully issued an HK$800 million tokenized green bond (environmental bond). This environmental bond is based on the government’s green bond program and is said to be the world’s first token-type environmental bond issued by the government.
What is a green bond?
Bonds for the purpose of raising funds for green projects (projects that contribute to solving global environmental problems).Emphasis is placed on traceability and transparency of funds to prevent fraudulent use
This green bond is issued under the green bond program and has a one-year yield of 4.05%. It will be marketed by a syndicate of four banks: Bank of China (Hong Kong), Crédit Agricole CIB, HSBC and Goldman Sachs. Goldman Sachs provides the platform (GS DAP) and the Central Monetary Markets Unit (CMU) of the Hong Kong Monetary Authority (HKMA) clears and settles the bonds.
The bonds issued were DVP settled on a private blockchain (PB) between security tokens representing the bond’s beneficial interest and cash tokens representing Hong Kong dollar claims, according to a HKMA statement. The process of bond processing, including coupon payments, secondary market transaction settlements and maturity redemptions, will also be digitized and run on the PB network.
The on-chain record on the PB Network is considered the legally final and final record of ownership of security tokens and cash tokens.
The HKMA plans to compile the lessons learned from this environmental bond issuance into a white paper and provide it as a blueprint for token-type bond issuance in Hong Kong.
Based on a joint project with the Bank for International Settlements
This token-type environmental bond issuance is based on the results of “Project Genesis” jointly conducted by the Bank for International Settlements Innovation Hub (BISIH) and HKMA. Since 2021, BISIH Hong Kong Center has explored the possibility of token-type green bonds issued in small units for individual investors by tokenizing bonds with blockchain technology.
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“Distributed ledger technology (DLT) has the potential to revolutionize the way financial markets operate,” said HKMA CEO Eddie Yue.
The issuance of tokenized environmental bonds is an important step in promoting the adoption and full potential of distributed ledger technology (DLT) in the bond market.
Luanne Lim, Chief Executive Officer of HSBC Hong Kong, said the green bond issuance “is an important step towards capital market innovation and the transformative potential of tokenization in the bond issuance and asset management process.” ,” he said.
Developments in government cryptocurrency policies and regulations
In October last year, the Hong Kong government, as an international financial center, announced a policy to attract crypto asset (virtual currency)-related companies that are proactive in innovation, and to develop legislation in cooperation with the financial authorities.
As part of the government’s promotion of virtual currency support, three proof-of-concept projects, including the introduction of e-HKD, have started, and the issuance of token-type green bonds is one of them. It’s a realization.
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In response to government policy, Hong Kong has also made significant progress in regulating cryptocurrencies.
Hong Kong’s Legislative Council passed a law last December to introduce a licensing regime for virtual currency service providers (VASPs). The new regulations will require cryptocurrency exchanges to implement internal controls to protect customer assets, arrange appropriate custodians, and cybersecurity. It also imposes requirements on things like record keeping and know-your-customer.
Hong Kong Securities and Futures Commission (SFC) CEO Julia Leung Fung-yee said on January 11 that Hong Kong authorities are developing regulations to allow individual investors to trade cryptocurrencies. She said that the SFC plans to issue a consultation document in the current quarter (January-March) on the terms and conditions under which individual investors can trade cryptocurrencies, as well as the licensing requirements for trading platforms.
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Furthermore, on January 31st, the Monetary Authority announced its policy on the regulation of cryptocurrencies and stablecoins. He outlined regulated activities, primarily related to stablecoins, and a comprehensive regulatory framework.
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Treasury Secretary Paul Chan said last month that Hong Kong aims to become a cryptocurrency hub. He commented on this token-type green bond issuance as follows.
Hong Kong actively promotes the application of innovative technology in the financial sector and actively researches new concepts and technologies to enhance the efficiency, transparency and security of financial transactions. The Hong Kong government will continue to promote the innovative development of the financial market.