Despite Hong Kong being the leading jurisdiction for the issuance of digital bonds, regulators are exploring how to improve the process. In the first half of this year five organizations issued digital bonds in Hong Kong valued at over $2 billion. By creating a favorable environment and offering subsidies for issuance costs, the jurisdiction is attracting foreign issuers, with Korean organizations making up four out of the five issuers.
During the first phase of legal work, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) identified that distributed ledger record keeping needed clarification. As a result, the Companies Registry has issued an FAQ confirming that a register of debenture holders maintained using DLT fulfills the relevant record keeping requirements under the Companies Ordinance.
The FSTB and the HKMA are about to embark on a second phase of work which will include exploring how to make the issuance process more digital, including recognizing electronic signatures in the creation of trusts for tokenized bond issuances. They also plan to explore the legal concepts of possession and transfer for tokenized fixed income instruments.
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