June 20, 2023
By Sharan Kaur Phillora
Hong Kong is witnessing the emergence of blockchain-based security products, offering investors new opportunities within the city’s thriving Web3 industry. These products stand apart from virtual assets like cryptocurrencies and are gaining traction among investors.
Here’s what we know:
UBS and Bank of China’s Hong Kong-based investment arm recently announced the launch of Hong Kong’s first private security product on a public blockchain, following the city’s introduction of a new crypto licensing regime. The introduction of a blockchain-based structured note signifies Hong Kong’s intention to foster a pro-blockchain ecosystem.
The green bond issued by Goldman Sachs on a private blockchain platform earlier this year, as well as the latest blockchain-based product from Bank of China International Holdings (BOCI) on Ethereum, further demonstrate Hong Kong’s commitment to expanding the Web3 industry beyond cryptocurrencies.
Unlike traditional securities held by a central securities depository, the BOCI and UBS product is created as a smart contract directly registered on the Ethereum network. This approach offers greater interoperability and connectivity across market participants. In contrast, the Hong Kong Monetary Authority (HKMA) issued tokenized green bonds on a permissioned blockchain, enabling on-chain processes throughout the bond lifecycle.
Ying Wang, Deputy CEO at BOCI, emphasized that the new product is designed specifically for customers in the Asia-Pacific region. UBS serves as the custodian, and clients can purchase the product using fiat currency. The collaboration between BOCI, a state-owned bank, and a Swiss bank in financial services and innovation showcases a significant step towards continuous exploration in this field.
While some questions regarding the accessibility of public blockchain security tokens to retail investors and the costs of issuance remain unanswered, experts anticipate advancements in lowering costs and expanding accessibility over time.
Hong Kong’s move to become a crypto hub, driven by its recent regulations on virtual assets, positions these security products as an extension of the city’s Web3 expansion efforts. The Securities and Futures Commission (SFC) regulates all securities uniformly, whether they are blockchain-based or not.
The introduction of blockchain-based securities reaffirms Hong Kong’s position as a forward-looking hub within the Web3 industry. With China’s digital-first mindset and robust cross-border trade, the proliferation of digitally native financial assets appears inevitable, as remarked by Ralf Kubli, a board member at the Casper Association.
As Hong Kong embraces blockchain-based securities, the financial landscape is evolving, bringing new possibilities and establishing the city as a prominent player in the Web3 revolution.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.