HKMA, banks form expert group to scale tokenized bonds

The Hong Kong Monetary Authority has formed an expert group with JPMorgan Securities, HSBC, Standard Chartered Bank, UBS, Ant Digital, HashKey Group and other industry participants to examine policy, market practices and innovations aimed at scaling tokenized bonds. The group held its first discussions in May.

The HKMA convened the group to review how Hong Kong's legal and regulatory regime applies to the issuance and trading of tokenized bonds. Members will consider specific policy measures, market practices and infrastructure needs to support wider commercial use of tokenized bonds.

Discussions focus on legal clarity for digital representations of bonds, settlement and custody arrangements, interoperability between trading and custody platforms, and the technical and operational standards needed for broader market participation.

Xiao Feng, chairman and CEO of HashKey Group, commented: ‘Scaling up commercial adoption of tokenized bonds requires coordination of legal and regulatory frameworks, infrastructure and the wider industry ecosystem.'

The expert group builds on earlier Hong Kong initiatives. In 2021 the HKMA partnered with the Bank for International Settlements to study bond tokenization. In February 2023 the Hong Kong government issued HK$800 million of tokenized green bonds. In 2024 it offered a HK$6 billion multi-currency digital green bond denominated in Hong Kong dollars, Chinese yuan, U.S. dollars and euros. Last year the government completed a digital bond issuance that integrated both China's e-CNY and a digital Hong Kong dollar.

Other jurisdictions are running parallel trials. In the United States the Depository Trust & Clearing Corporation has a pilot to place representations of U.S. Treasury securities on blockchains. In South Korea a partnership involving Ripple and Kyobo Life Insurance has enabled tokenized government bond transactions. In Japan the Japan Securities Clearing Corporation launched a trial with Mizuho, Nomura and Digital Asset to test blockchain-based collateral arrangements using Japanese government bonds.

The HKMA did not provide a timeline for the group's recommendations. The initiative aims to address legal, operational and market-practice barriers that market participants identify before tokenized bonds can move from pilots to regular issuance and secondary-market trading.