In a significant move to promote the development of the digital securities market and encourage broader adoption of tokenisation in capital market transactions, the Hong Kong Monetary Authority (HKMA) recently introduced a Digital Bond Grant Scheme (DBGS) providing up to HKD$2.5 million (around AUD$500,000) to each eligible digital bond issuance in Hong Kong.
The DBGS covers 50% of the expenses incurred by a bond issuer in the primary issuance of a eligible digital bond.
HKMA says eligibility of a bond issuance as a “digital bond" will be determined on a case-by-case basis:
In general, “digital bond” refers to a bond that leverages distributed ledger technology (DLT) for digital representation of ownership, which could include, for example, legal titles and/or beneficial interests in the bond.
Financial subsidies under the DBGS are structured in two tiers:
Half Grant: Up to HK$1.25 million (around AUD$250,000) for issuances meeting certain Basic Requirements.
Full Grant: Up to HK$2.5 million (around AUD$250,000) for issuances meeting both the Basic and Additional Requirements.
The Basic Requirements to qualify for a half grant are:
the digital bond must be issued in Hong Kong; and
the team involved in the development and/or operations of the DLT platform and other digital aspects of the issuance (“digital team”) must have substantial Hong Kong presence; or
the digital bond must be issued on a DLT platform operated by the Central Moneymarkets Unit.
The Additional Requirements are that the digital bond must be:
issued on a DLT platform provided by an entity that is not an associate of the issuer;
issued at a minimum size of HK$1 billion equivalent;
issued to five or more investors that are not associate(s) of the issuer or DLT platform provider(s) of the issuance;
listed on the Stock Exchange of Hong Kong Limited, or virtual asset trading platform(s) (VATPs) licensed by Hong Kong's Securities and Futures Commission.
The HKMA will start accepting applications from 28 November 2024, with the scheme initially running for three years. Applications can be made for bonds issued on or after 16 October 2024.
By offering substantial financial incentives to issuers of digital bonds, the DBGS could become a significant step in the evolution of Hong Kong's capital markets, promoting innovation and the adoption of cutting-edge technology. The program is generous and will go some way to offsetting the advisory fees involved in digital bond issuance, encouraging critical mass in the development of digital bond markets. After making significant strides in the past years in setting up a comprehensive regulatory framework for asset tokenisation, the latest announcement underscore Hong Kong’s ambitions to cement itself as a global hub for digital finance.
Written by J Huang and S Pettigrove
Comentarios