Earlier this month, the Hong Kong Monetary Authority (HKMA) issued the largest digital bond to date, a four currency green bond equivalent of around US$756 million. Now HSBC and the Bank of East Asia used the bond as collateral for a repo transaction. That involves one bank selling the bond to another in exchange for cash as short term finance. Later the bond is repurchased (repo) at a slightly higher price.
For the issuance, Hong Kong’s Central Moneymarkets Unit (CMU) was the central securities depository (CSD), and integrated with the HSBC Orion blockchain solution. Hence, the collateral from the same blockchain was used for the repo transaction.
“The four digital bonds – recently issued by the Hong Kong government on HSBC Orion as part of the CMU’s infrastructure – have seen unprecedented investor demand, secondary trading, and now repo trading,” said John O’Neill, HSBC global head of digital assets strategy.
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