Hong Kong Central Bank Launches Tokenized Bond Subsidy Program

Boosting Tokenized Bond Issuance Hong Kong Monetary Authority has announced a subsidy program, namely Digital Bond Grant Scheme, to help with the issuance cost of tokenized bonds. This program targets accelerating the adoption of tokenization in financial markets. This is part of the wider strategy of Hong Kong in strengthening its position as a global leader in digital finance and securities. Program Details DBGS grants a subsidy of as much as 50% of eligible expenses for the issuance of tokenized bonds, with the total not to exceed $321,184 (HK$2.5 million) per grant, and not more than two grants can be allowed in the first three years. Subsidy Tiers Half Grant: For those bonds that are issued digitally on a platform operated or designated by the CMU in Hong Kong, firms must be substantially present in the region. Full Grant: Applies to bond issuance of at least $128.5 million with five or more investors. These bonds need to be listed in the Stock Exchange of Hong Kong or a platform licensed under the city’s financial regulator . Strategic Focus on Tokenization It stems from an HKMA’s research project-Project Evergreen that was initiated in 2021 for the study of the use of DLT in the financial markets. Eddie Yue, chief executive at HKMA, reiterated that financial incentives are imperative to overcome such persistent hurdles for issuers while adopting tokenized bonds. According to Yue, tokenization has been gaining significant momentum with global issuances exceeding US$10 billion in notional value over the last decade. Still, its adoption remains nascent, which motivated the HKMA to implement the DBGS to spur more market participants. Hong Kong’s Momentum in Digital Finance The program builds on Hong Kong’s success in February 2023 when the government issued $100 million in tokenized green bonds under its Green Bond Programme. This milestone highlighted the city’s capability in digital bond issuance and its commitment to integrating sustainability with innovation. Crypto Tax Exemptions Under Consideration It also considers exempting hedge funds, private equity, and family investment vehicles from crypto taxes in a complementary move. This six-week consultation paper aims to attract global investors to further establish Hong Kong as a leading crypto hub. With initiatives like the DBGS and proposed tax reforms, Hong Kong is positioning itself as a pioneering force in digital finance, fostering innovation and cementing its role as a global financial leader.