Hong Kong has brought central bank money tokens into the settlement process of its latest HK$10 billion ($1.29 billion) digital green bond issuance, a move business leaders said could shorten settlement time, cut costs and curb risks, while also paving the way for the long-term expansion of the city’s tokenized markets.

Announced on Tuesday under the special administrative region government’s Sustainable Bond Programme, the multi-currency offering, denominated in Hong Kong dollars, renminbi, US dollars and euros, is the world’s largest digital bond issuance to date, and drew subscriptions exceeding HK$130 billion.

Both the Hong Kong dollar and renminbi tranches introduced the option to settle with tokenized central bank money alongside traditional methods in the primary issuance process. This is the first digital bond offering globally that integrates digital central bank money in the form of e-CNY and e-HKD in settlement.

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“The integration of tokenized central bank money in this issuance lays the foundation for future integration with other forms of digital money, fostering interoperability and unlocking new synergies across different digital infrastructures,” said Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority.

“The advantages of tokenized central bank money are evident,” said Yao Qing, associate partner of the tokenization division at HashKey Group. It enables “true atomic settlement”, which means the exchange of digital bond tokens and central bank money tokens, such as the e-CNY and e‑HKD, “is completed simultaneously within a single transaction”.

“This fundamentally eliminates counterparty credit risk during settlement,” said Yao, as the transaction either succeeds or fails entirely for both sides, leaving no room for one party to deliver while the other defaults.

She added, “This innovation goes beyond a mere technological upgrade; it represents an optimization of the foundational logic of finance.” It creates a secure and efficient foundation for value exchange by extending the credibility of central bank money onto blockchain networks, which is expected to lay the groundwork for the tokenization of a broader range of assets, including stocks, funds and derivatives, Yao explained.  

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Agnes Tsang, partner at law firm Allen Overy Shearman Sterling, one of the deal’s legal advisers, said the project shows how distributed ledger technology — best known through its application in blockchain — can be applied to real-world settlement in capital markets.

Michael Ng, partner at Linklaters, another adviser, added that the successful use of tokenized central bank money to settle government green bonds in Hong Kong “sets a new benchmark for the commercial adoption of tokenization in Asia”.

Yao said she believes this issuance sends “a clear signal” of the Hong Kong government’s determination to integrate tokenization technology as a core component of the financial system. “This is no longer an isolated ‘pilot’ but a new paradigm for regularized financial activities,” she added, noting that “we are greatly encouraged to witness such progress”.

This is the SAR government’s third digital green bond sale, after an HK$800 million 365-day offering in 2023 and a HK$6 billion two-year multi-currency deal in February 2024. It is also the first since the government released its Policy Statement 2.0 on the Development of Digital Assets in June, which commits to regularizing the issuance of tokenized government bonds.  

Following a five-day virtual roadshow, the latest bonds were priced on Monday at 2.5 percent for the HK$2.5 billion two-year tranche, 1.9 percent for the 2.5 billion yuan ($350 million) five-year tranche, 3.633 percent for the $300 million three-year tranche, and 2.512 percent for the 300 million euros ($347.34 million) four-year tranche.

According to the HKMA, the issuance has attracted subscriptions by a wide spectrum of institutional investors globally including asset managers, banks, insurance companies, and private banks, with many taking part in a digital bond offering for the first time.  

Contact the writer at irisli@chinadailyhk.com