Issued by the Hong Kong Monetary Authority (HKMA) Report On Aug. 25, it detailed the results of its Project Evergreen study, which analyzed the market impact of bond tokenization.
In a 24-page overview, the Hong Kong regulator lays out use cases, benefits and any challenges faced during the study. The conclusion is that tokenization brings improvements to the bond market.
HKMA Chief Executive Eddie Yue said the study highlighted the potential of deploying distributed ledger technology (DLT) in real capital market transactions under Hong Kong’s existing legal framework.
“It also demonstrates the potential of distributed ledger technology to improve the efficiency, liquidity and transparency of bond markets.”
Research reveals some key efficiencies of bond tokenization, including the ability to go paperless and eliminate the need for physical global certificates – saving time and errors, the ability for parties to interact on a common DLT platform, and enhanced by Transparency: Real-time data synchronization.
Additionally, it allows atomic DvP settlement of bond transfers and encourages end-to-end DLT adoption.
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Yue also pointed out the shortcomings of the experiment, saying that the tokenization of bonds is still in its “infancy.” Many challenges must be overcome before mass adoption, he said.
“As more and more financial institutions come up with their own tokenization solutions,” he said. “It is critical to consider how different solutions connect and interact with each other and how legacy systems can avoid fragmentation.”
“Existing legal and regulatory regimes may also need to be fine-tuned to keep up and facilitate technology adoption.”
“Existing legal and regulatory regimes may also need to be fine-tuned to keep up and facilitate technology adoption.”
The report comes as Hong Kong is gradually positioning itself as a hub for cryptocurrency and decentralized finance activity. Hundreds of companies are reportedly lining up to apply for Hong Kong cryptocurrency licenses.
On July 27, Hong Kong announced a partnership with Saudi Arabia on tokens and payments.
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