Not long ago, we had the opportunity to inform you about Japan's revised stance on stablecoins and its work on Central Bank Virtual Currencies . Today, however, we have the opportunity to present further information that clearly indicates the ongoing evolution of financial markets, driven by the increasingly widespread adoption of blockchain technology. Despite the very advanced work on the digital yuan, China is perceived as a challenging region of the world for regulation, particularly due to its very restrictive approach to all activities involving virtual currencies. At the same time, the government of the Hong Kong Special Administrative Region of the People's Republic of China, which remains somewhat isolated from the "mainland," successfully conducted a fully tokenized bond sale worth $101 million.
According to the Hong Kong Monetary Authority, this is the first such initiative by any government in the world. The 365-day bonds, with a yield of 4.05%, were offered in collaboration with the Bank of China, Crédit Agricole CIB, HSBC, and Goldman Sachs as the platform for the transaction. The bonds were excluded from distribution in the United States, Japan, Canada, and other jurisdictions where laws explicitly prohibit or severely restrict the tokenization of such securities. According to Christopher Hui, Secretary of Financial Services and the Treasury: "The tokenization of green bonds is one of the pilot projects announced in the Government Statement on the Development of Virtual Assets in Hong Kong [...]. "Through a clear policy stance and roadmap, the government will strive to provide an enabling environment to promote the sustainable and responsible development of the virtual asset sector. We invite market participants to conduct token issuances in Hong Kong." As indicated in an official report by the Hong Kong Monetary Authority (HGMK), all processes typically associated with the bond lifecycle, such as coupon payment, secondary trading settlement, and maturity redemption, have been digitized and conducted on a private blockchain network. The so-called "green bonds" included in the program are issued to finance environmentally friendly projects. Tokenization is intended to facilitate the issuance process in the simplest and most ecological manner possible, while also facilitating the sale of bonds through the use of a digital form.
According to the HGMK report, the issuance not only demonstrates that the Hong Kong legal framework allows for the implementation of distributed ledger technology (DLT) for real-world capital market transactions, but also demonstrates the potential of DLT (Distributed Ledger Technology) to enhance efficiency, liquidity, and transparency in bond markets. The HKMA's statement clearly states that the issuance was a pilot program for future issuances of this type in Hong Kong, and further collaboration with the industry is planned to facilitate further tokenized issuances.
Hong Kong's tokenized bond issue has been so successful that the Philippine government is now planning a similar move. The Philippine government has announced plans to raise approximately $180 million through the sale of tokenized treasury bonds. The Philippines Bureau of the Treasury, following Hong Kong's example, plans to issue one-year bonds with a settlement date set for November 22 .
While it's certainly worth noting that neither Hong Kong nor the Philippines are among the world's most important capital markets, the sheer pioneering nature of these solutions is undeniable. If we also consider the information surrounding national virtual currencies and the ongoing regulation of "traditional" blockchain products, we might begin to see a trend emerging. All existing capital market regulations, such as those related to trading in financial instruments or public offerings, seem to place a particular emphasis on "transparency." If we combine transparency with the simplicity, speed, and environmental friendliness of digital solutions, wouldn't the adoption of "distributed ledger technology" seem like the next natural step for treasury bonds, recently "dematerialized" shares, and perhaps all other securities as well?
This alert is for informational purposes only and does not constitute legal advice.
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