The Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority jointly announced on Monday that they have concluded the first phase of a review regarding the further adoption of distributed ledger technology (DLT) in Hong Kong's fixed income market, suggesting that Hong Kong's legal and regulatory environment is already sufficiently flexible for tokenised bond issuances.
The FSTB and the HKMA will embark on the next phase of the review in the second half of this year to explore the necessary flexibilities and legislative changes required for building a future-ready ecosystem to facilitate the more extensive use of DLT in the fixed income market and digital assets more broadly.
Specifically, the next phase of the review will examine the legal enhancements for addressing issues in adopting DLT in the current processes of the fixed income market, as well as concepts involved in a more digitally native setting.
The government said it will explore areas like allowing electronic execution of issuance documents for tokenised bonds to enable greater efficiency and further automation in the issuance process. For example, recognising the use of electronic signatures in the creation of trusts in connection with the issuance of tokenised bonds and funds.
It will also consider concepts such as possession and transfer in the context of tokenised fixed income instruments, to provide issuers with the flexibility to select the most suitable form of issuance as technology continues to advance.
Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said that a clear and robust regulatory framework provides a solid foundation for the sustainable development of the digital asset sector.
By providing clarifications on DLT record keeping requirements today and exploring further legislative enhancements in the next phase, we are keeping Hong Kong at the forefront of Web3 development and financial innovation," Hui added.
HKMA Chief Executive Eddie Yue Wai-man noted that this review aims to build on this momentum to establish a robust and forward-looking fixed income ecosystem in Hong Kong.
