Skip to content

HSBC Tokenizes Deposits in HK as Govt Plans New RWA Tokenization Regs

Hong Kong officials have announced imminent plans for new regulation on tokenized real-world assets, just as HSBC and Ant Group start testing tokenized deposits in the Hong Kong Monetary Authority sandbox.

Banking giant HSBC has reportedly been trialling the use of tokenized deposits in the Hong Kong Monetary Authority (HKMA) blockchain sandbox environment. The trial was carried out in collaboration with Jack Ma’s Chinese financial powerhouse, Ant Group, and revolved around the issuance, transfer and redemption of tokenized funds.

The primary goal of the exercise was to explore the potential benefits of deposit tokenization in providing a real-time 24/7 platform for fund transfers between corporate accounts within HSBC. For the test, HSBC connected to Ant Group’s proprietary blockchain, which is also supported by its various banking partners.

The involvement of Ant Group’s banking partners significantly enhanced many elements of the treasury fund transfer process, such as turnaround time, cost efficiency and transparency. HSBC’s Global Payment Solutions head of emerging payments Vincent Lau stressed the bank’s commitment to this and other blockchain initiatives.

“It will pave the way for future research on how blockchain and tokenization can drive efficiencies and foster innovations in corporate treasury management.”

Coincidentally, the HSBC trial was reported at the same time as officials announced imminent policy updates from the Hong Kong Securities and Futures Commission (SFC) specifically covering tokenized assets.

At Hong Kong Fintech week on Wednesday, Secretary for Financial Services and the Treasury, Christopher Hui, addressed concerns that Hong Kong authorities had lost some of their enthusiasm for Web3 following the SFC investigation and crackdown on the JPEX crypto exchange.

“We have been asked many times whether JPEX will affect our determination to grow the web3 market. The answer is a clear no.”

Hui backed this up by citing the upcoming SFC tokenization circular, along with a new HKMA consultation on regulations for stablecoin issuers, and an SFC focus on how to cover trades occurring outside of exchanges.

Sure enough, the very next day, the SFC published not one but two of the promised circulars regarding tokenized securities. These suggested that such products should generally follow the same rules as the underlying securities they represent, while addressing any new risks inherent in tokenization.

These might include risks regarding how ownership is recorded and transferred, and specific risks related to the technology, such as forking, outages and cybersecurity. The overall tone of the documents was, however, broadly positive.

“The SFC is supportive of intermediaries taking the initiative to tokenise traditional securities and believes the industry has made encouraging progress so far in coming up with scalable and interoperable tokenisation solutions.”

It marks a far cry from the attitude of the SFC’s equivalent commission in the U.S., but then, Hong Kong has long expressed a desire to become a crypto hub, which, if the actions of its regulators are anything to go by, the United States definitely doesn't want.