Successful Issuance of Tokenized Green Bonds
The Hong Kong Monetary Authority (HKMA) recently announced that Hong Kong’s first tokenized government green bonds were successfully issued. The green bond is based on the government green bonds plan and is also the first officially issued tokenized green bond in the world.
The issuing scale of the tokenized bond is 800 million Hong Kong dollars, the issuing period is one year, and the issuing yield is 4.05%. The funds raised will be used for project financing and refinancing activities in the government’s green bond plan. The settlement and delivery of bonds are handled by HKMA.
Participants in this Tokenization
The green bond tokenization is based on Goldman Sachs’ tokenization platform GS DAP. This platform is developed based on DAML smart contract language. The green bond issuance will settle the security tokens representing the bond equity and the cash tokens representing the Hong Kong dollar. Interest payment, market transaction and maturity redemption will be completed through the tokenization platform.
Before Hong Kong issues token green bonds, the European Investment Bank issued 100 million euros of digital bonds using the GS DAP platform in November last year. The issuance period of the digital bond is 2 years, and the coupon rate is 2.58%. This digital bond is the first time to use the Central Bank Digital Currency for payment and settlement.
Hong Kong Government Green Bonds Plan
The tokenized green bond is the second green bond issued in 2023, and also the sixth issuance based on the government green bonds plan. In January this year, Hong Kong issued US $5.8 billion of green bonds, denominated in three currencies, which is also the largest single issuance under the government’s green bond plan.
Hong Kong’s government green bonds plan was launched in 2018, with a planned borrowing ceiling of US $12.8 billion (expanded to US $25.6 billion in 2021). The funds raised by green bonds can only be used for green projects, such as renewable energy and green buildings. At present, Hong Kong’s cumulative green bond issuance scale is about US $15 billion, accounting for about 60% of the issuance limit.
Hong Kong’s Actions in Digital Assets
The issuance of tokenized green bonds is an important step in the development of digital assets in Hong Kong. At the Financial Technology Forum last October, Hong Kong issued a policy declaration on the development of digital assets, saying that it would formulate policies for the industry and ecosystem, and build a global digital asset center. This is also the first time that Hong Kong announces to accelerate its layout in the field among many international financial centers.
In the development of digital assets, HKMA has started the preparation of the digital Hong Kong dollar and participated in the cross-border payment test of the digital RMB. In June this year, Hong Kong will issue a Virtual Asset Service Provider license to regulate digital asset transactions.
Several supervisors believe that the tokenized digital bond is a pilot project announced in Hong Kong’s development policy, marking Hong Kong’s advantages in combining the bond market, green and sustainable finance, and financial technology. Hong Kong actively participates in the financial innovation related to the third generation Internet (Web 3), so that the digital asset industry can develop sustainably and responsibly.
The banks participating in the underwriting of tokenized green bonds believe that the issuance proves the diversity and innovation of the Hong Kong financial market, lays the foundation for the asset digitization of other market participants, and will help consolidate Hong Kong’s leading position as a green and sustainable financial center in the Asia-Pacific region.
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