Hong Kong’s government has sold the world’s first tokenised sovereign green bonds, a HK$800 million (US$102.56 million) one-year offering with a coupon rate of 4.05%.
Coupon payments, settlement of secondary trading and maturity redemptions, and other processes through the term of the bond are digitalised and performed on a private blockchain network, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, says in a statement on February 17.
It did not identify investors who took up the bonds and spokespersons for HKMA did not immediately respond to questions from Asia Asset Management.
Proceeds of the issuance will be used to finance projects that focus on renewable energy, energy efficiency and conservation, and pollution prevention and control. These are projects which are eligible under the government’s green bond framework.
“The tokenised green bond issuance with on-chain delivery-versus-payment settlement using cash tokens issued by the HKMA is an important step forward in promoting the adoption and realisation of the full potential of distributed ledger technology in the bond market,” HKMA Chief Executive Eddie Yue says in the statement.
Distributed ledger technology or DLT is a decentralised digital database system where transactions are recorded and shared by multiple parties. It allows simultaneous access, validation and record updating. Unlike a traditional database system, there is no central administrator or centralised data storage.
“Building on the experience from this issuance, the HKMA and the government will work with other stakeholders to conduct further tokenised issuances to push the boundary and encourage usage,” Yue says.
Bank of China (Hong Kong), Crédit Agricole CIB, Goldman Sachs, and Hongkong and Shanghai Banking Corporation were the joint lead managers and distributors of the bonds.