Advertisement
Blockchain
TechPolicy

Hong Kong’s tokenised green bonds saw efficiency gains from blockchain-based trading, HKMA says, but challenges remain

  • Project Evergreen, which issued US$102 million in green bonds on a distributed ledger in February, saw ‘significant operational improvement’ in trading
  • Challenges to wide adoption remain in the largely paper-based industry, the HKMA concluded, including interoperability issues between platforms

Reading Time:2 minutes
Why you can trust SCMP
1
The Hong Kong skyline seen from the Tsim Sha Tsui waterfront on August 10, 2023. Photo: SCMP / Jelly Tse
Xinmei Shen
Hong Kong’s first blockchain-based bonds proved that tokenisation could improve efficiency, liquidity and transparency in the bonds market, according to the Hong Kong Monetary Authority (HKMA), but several challenges need to be addressed to achieve wide adoption.
Hong Kong’s de facto central bank issued HK$800 million (US$102 million) in tokenised green bonds in February as part of the city’s efforts to become a virtual asset hub and promote sustainable financing.

The initiative, called Project Evergreen, showed that the use of distributed ledger technology (DLT) achieved “significant operational improvement”, the HKMA said in a conclusion paper published on Thursday. The authority also highlighted issues that remain to be resolved, including potential problems with interoperability between different systems, which could arise when people buy blockchain-based bonds with fiat currency, for example.

“Despite the increasing number of issuances globally in recent years, bond tokenisation is still at its infancy; multiple challenges would have to be overcome for it to be widely adopted,” Eddie Yue Wai-man, chief executive of the HKMA, wrote in the report.

While a typical bond issuance process involves multiple organisations interacting through different systems to manage issuance, settlement, payment and redemption, DLT improves efficiency by “bringing together all the different parties onto one common platform”, providing “an immutable single source of truth”, the HKMA wrote.

DLT also allowed settlement to be done “instantly and simultaneously”, thus reducing risks and delays from the process, the regulator said.

Advertisement