Hong Kong Entices Tokenized Bond Issuers with Grants to Drive Adoption

• Hong Kong’s financial regulator announced a grant scheme for tokenized bond issuers. 
• The grant will cover certain costs of issuing tokenized bonds locally. 
• Interested issuers must meet certain requirements to qualify for a grant. 

The Hong Kong Monetary Authority (HKMA) announced a new grant scheme to subsidize tokenized bond issuance and encourage the adoption of the underlying technology in capital market transactions. 

HKMA’s Chief Executive, Eddie Yue, said the idea to launch the scheme came after the regulator realized through Project Evergreen that “additional incentive” can help encourage bond issuers to adopt distributed ledger technology (DLT). The HKMA initiated Project Evergreen in 2021 to test how blockchain technology can enhance market efficiency, liquidity, and transparency in financial markets. 

Project Green Enters Next Phase with Subsidies 

In an update on November 28, the HKMA said Project Green was proceeding to the next phase after moving “far beyond” proof-of-concept for bond tokenization, evidenced by two successful issuances. 

The program, dubbed the Digital Bond Grant Scheme (DBGS), aims to subsidize up to 50% of eligible expenses for domestic tokenized bond issuances, with a cap of HK$2.5 million ($321,188) per grant if the issuance meets “basic” and additional requirements. 

Per HKMA’s guidelines , the basic requirements include issuing the bond in Hong Kong via a DLT platform operated by the Central Moneymarkets Unit (CMU) and having a digital team with a “substantial” local presence. 

“The extent to which a digital team is considered to have substantial presence in Hong Kong will be determined on a case-by-case basis, taking into account factors such as the size and composition (including seniority) of the team based in Hong Kong,” the HKMA wrote. 

Issuers that meet basic requirements will be eligible for half the HK$2.5 million grant. Those who qualify for the full grant must issue a minimum bond size of $128.5 million to at least five investors and be listed on the Stock Exchange of Hong Kong (SEHK) or an HKMA-licensed platform. 

According to the guidelines, the grant will reimburse various costs incurred by qualified issuers, including fees to DLT service providers, legal advisors, auditors, and arrangers based in Hong Kong. The grant will also cover CMU lodging and clearing fees. 

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