The Hong Kong Monetary Authority (HKMA), the city’s central bank, has unveiled the Digital Bond Grant Scheme (DBGS) to encourage the use of tokenization technology in capital markets and enhance the digital securities landscape.
The DBGS offers subsidies covering up to 50% of eligible costs for tokenized bond issuances. The maximum grant is $321,184 (HK$2.5 million) per issuance, with companies allowed to apply for two grants during the program’s three-year duration. For the full grant, bonds must have a minimum issuance size of $128.5 million, involve at least five investors, and be listed on the Stock Exchange of Hong Kong (SEHK) or another licensed platform. The half grant is available for smaller issuances made through platforms operated by the Central Moneymarkets Unit (CMU) and issued by companies with significant operations in Hong Kong.
Applications for the DBGS opened on Nov. 28, 2024. The program is set to run for three years, allowing issuers ample time to leverage the initiative and explore tokenization opportunities.
The scheme is tailored for Hong Kong’s financial ecosystem, aligning with the city’s vision of becoming a leader in digital finance and a key global player in tokenized assets.
HKMA Chief Executive Eddie Yue explained that while tokenization has gained traction, some issuers still face adoption hurdles. The DBGS is designed to alleviate these challenges by reducing costs and incentivizing broader adoption. This initiative builds on Project Evergreen, launched in 2021, which explored the potential of distributed ledger technology in financial markets. It follows Hong Kong’s earlier success with tokenized green bonds, such as the $100 million issuance under the Green Bond Programme in February 2023.
By subsidizing tokenized bond issuance costs, the HKMA aims to foster innovation and reduce financial barriers for issuers. This is part of a larger push by Hong Kong to solidify its position as a digital finance hub. Alongside the DBGS, the city is considering tax exemptions for crypto gains and other investments, while ZA Bank recently introduced a service for retail users to trade Bitcoin and Ether using fiat. These developments underscore Hong Kong’s commitment to advancing its digital economy.
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