Hong Kong to Provide Tokenized Green Bonds for Institutional Investors: Reports

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• Hong Kong Special Administrative Region has resolved to issue tokenized green bonds to institutional investors.
• As Asia’s largest ESG bond offering, the green bond offering is worth about US$5.75 billion.
• The government has seen strong demand for green bonds from institutional investors.
• Hong Kong’s regulatory uncertainty led some crypto companies to move outside the territory.
• However, the government had completed the legislative work required to establish a licensing framework for digital asset providers.

There are reports that the Government of the Hong Kong Special Administrative Region of the People’s Republic of China has resolved to issue tokenized green bonds to institutional investors.

This development, as reported, manifested in line with the government’s green bond program. Notably, the green bonds are reportedly denominated in US dollars (USD), euro (EUR), and Renminbi (RMB).

The green bond offering is worth about US$5.75 billion, becoming the largest ESG bond issuance in the Asian continent. Since the news about the offering dominated the airspace, it has reportedly attracted over US$36 billion in equivalent orders from global investors. The green bond issuance allowed participation from investors who had not participated in the government’s previous green bonds.

As per reports, the government structured the issuance of green bonds in various categories. One of the categories entails US$1 billion with a 5-year tranche at 4.585% (70 basis points over 5-year US Treasuries). Additionally, there is a US$1 billion category, with a 10-year tranche at 4.672% (95 basis points over 10-year US Treasuries), and so on.

Hong Kong to Provide Licensing Framework for Digital Asset Providers

Many blockchain-related businesses have started in Hong Kong in the last few years, including exchanges Crypto.com, BitMEX, Bitfinex, OSL, and others. Between July 2020 and June 2021, the city received $60 billion in incoming cryptocurrencies, according to blockchain data firm Chainalysis.

Hong Kong’s regulatory uncertainty has recently led some crypto companies to move to other markets. However, the Hong Kong Securities and Futures Commission (SFC) plans to establish regulatory requirements for local cryptocurrency exchanges following the collapse of FTX. The SFC confirmed that a regulatory framework would be implemented to protect investors and the industry.

The Financial Secretary of the Hong Kong Monetary Authority, Paul Chan, talked about the ongoing efforts by the region to foster technology, digital assets, and its economy. According to the exec, the government had concluded the legislative work required to set up a licensing framework for providers of digital asset services.

Notably, the legislative work allows these providers to operate in line with anti-money laundering, anti-terrorist financing, and investor protection stipulations.

On the Flipside

• Despite Hong Kong’s Monetary Authority (HKMA) releasing a paper on crypto assets and stablecoin regulation, the government won’t implement it until 2024.
• Authorities continue to embrace the industry, as Paul Chan declared just a few days after the demise of FTX that the region will embrace crypto and value its innovations.

Why You Should Care

Hong Kong wants to be a crypto hub again. In October, the government announced that it would hold consultations on allowing retail investors to invest on registered platforms. Authorities also said they might consider virtual asset futures exchange-traded funds (ETFs). Another example of the country’s commitment to making digital assets more accessible is its recent move with tokenized bonds.

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