[WORLD] Chinese fund firm Bosera Asset Management (International) and cryptocurrency exchange operator HashKey Group have announced plans to create the world's first tokenised money market exchange-traded funds (ETFs) in Hong Kong, highlighting the city's goal to become a digital-asset powerhouse.
On Friday, the duo announced that they would add new tokenised share classes to two existing money market ETFs, the Bosera HKD Money Market ETF and the USD Money Market ETF, giving both retail and institutional investors with a low-risk, blockchain-based liquid investment option. The Securities and Futures Commission-approved ETFs will be released in April.
This announcement comes as Hong Kong continues to position itself as a leader in the Asia-Pacific region for well-regulated cryptoasset and blockchain innovation. The city has been actively embracing blockchain technology and digital assets as part of its strategy to modernize the financial sector. In recent years, Hong Kong has seen significant strides in the tokenization of real-world assets, with major financial institutions exploring tokenization solutions to bridge the gap between traditional finance and the emerging world of blockchain-based transactions.
Tokenisation is the process of converting the rights to an asset, such as a money market fund, into a digital token that can be exchanged on a distributed ledger network. Money market funds primarily invest in low-risk, short-term debt assets such as commercial paper and treasury bills, which provide liquidity and capital preservation while yielding returns. Money market ETFs provide similar benefits, although they often have greater trading freedom on stock exchanges.
The tokenization of money market ETFs represents a significant step forward in Hong Kong's financial innovation landscape. This move aligns with the global trend of asset tokenization, which is projected to grow from $2.1 billion in 2022 to $24.1 billion by 2030. Hong Kong is expected to capture a significant share of this market due to its advanced financial infrastructure and supportive regulatory environment.
"Compared with traditional money market funds, this product greatly improves transparency and operational efficiency through blockchain technology, enabling investors to gain direct exposure to high-quality money market instruments by tokens, thereby fulfilling their asset allocation and risk management needs," the companies stated.
The launch of tokenized money market ETFs in Hong Kong follows similar initiatives in other global financial centers. In the United States, major financial institutions such as BlackRock and Franklin Templeton have already pioneered tokenized money market funds on public blockchains like Ethereum and Stellar. These funds have demonstrated how blockchain can streamline settlement processes and provide investors with real-time insights into their holdings.
The Hong Kong Monetary Authority's (HKMA) Project Ensemble sandbox, which investigates the tokenization of real-world assets (RWAs) and enables a new financial market infrastructure involving digital money and assets, includes tokenized money market exchange-traded funds (ETFs) as one of its use cases. At the sandbox's inauguration last August, Eddie Yue Wai-man, the CEO of HKMA, stated that tokenization has the potential to improve the efficiency, transparency, and affordability of financial transactions.
The HKMA's Project Ensemble sandbox, launched in August 2024, has been instrumental in fostering innovation in the tokenization space. It allows financial institutions to experiment with asset tokenization projects related to various use cases, including fixed income and money market instruments. This initiative is part of Hong Kong's broader strategy to enhance its position as a premier asset and wealth management center by promoting wider adoption of blockchain technology in financial markets.
"Bringing money market ETFs on-chain through blockchain technology is a crucial step for traditional finance to embrace Web3," said Xiao Feng, chairman and CEO of HashKey
This development is expected to have far-reaching implications for Hong Kong's financial ecosystem. By offering tokenized money market ETFs, Hong Kong is not only catering to the growing demand for digital asset investments but also potentially attracting a wider range of investors, from local retail traders to institutional players looking for new asset classes to add to their portfolios. As the city continues to develop its regulatory framework and infrastructure for digital assets, it is likely to see increased participation from both local and international investors in its tokenized financial products.
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