Budget 2025: Hong Kong to issue third tranche of tokenised bonds and boost digital bonds market

Hong Kong will continue to encourage the issuance of digital bonds through the Digital Bond Grant Scheme and prepare the third tranche of tokenised bond issuance, said Paul Chan, the financial secretary, at his 2025 Budget Speech on Wednesday.

The government will explore measures to enhance the wider adoption of bond tokenisation and tokenising traditional bonds, said Chan.

“Any movement conducive to the promotion of digital bonds is a good thing,” said Simon Lee, a member of the Legislative Council of Hong Kong, “there has to be enough diversified products to activate the market, so that Hong Kong's position in the financial market can be consolidated.”

HKMA has issued two batches of tokenised green bonds, HK$ 800 million in February of 2023 and around HK$ 6 billion in February of 2024, enabling tokenisation to move beyond the proof-of-concept stage to the practical application level.

Tokenised bonds, issued and traded with blockchain technology, are a type of digital bond, which globally has reached an  issuance value of US$3.9 billion (HK$ 30 billion) by the end of March 2023, according to the Hong Kong Monetary Authority.

To encourage more institutions to participate in the issuance of digital bonds, the Digital Bond Grant Scheme (DBGS), a three-years grant scheme of up to HK$2.5 million to cover the eligible digital bond issuance costs, was announced in November last year, after first introduced on Oct. 16, 2024, in the 2024 Policy Address.

The echo comes in quick succession as Singapore launched Global-Asia Digital Bond Grant Scheme (G-ADBGS), a five-year digital-bonds-supporting scheme, to promote the issuance of digital bonds in January 2025.

“I would consider tokenised bonds as a very good way to invest,” said Chen Shiyi, a virtual asset investor from mainland China who works at Pleasanton Ventures Limited, a Hong Kong-based Bitcoin industry firm.

“I think that as technology develops, tokenised bonds should be considered a major trend.”

However, Graham, a retail investor interviewed in Hong Kong, doesn’t prefer digital bonds in his investment portfolio compared to traditional bonds.

“I am not sure that the government should encourage people to speculate on this because I don't think the return on investment is guaranteed,” he said.

Looking forward, Lee said the government should promote digital bonds more widely and publicly and expand to the retail market through institutions, as they are still in an early stage of development.