Hong Kong hires banks for debut digital green bond sale

HONG Kong’s government has hired banks to arrange its debut sale of digital green bonds, expanding the use of a nascent technology that promises faster settlement and payment.

The special administrative region is looking to raise HK$800 million (S$135.8 million) via the issuance of so-called tokenised green notes and has tapped Bank of China, Credit Agricole, Goldman Sachs Group and HSBC Holdings to hold investor calls from Monday (Feb 13), according to people familiar with the matter who requested anonymity discussing private matters.

The beneficial interests in the notes will be recorded on a distributed ledger technology-based digital assets platform provided by Goldman Sachs, said the people.

Digital bonds remain a relative novelty, with Singapore’s DBS Group Holdings and the European Investment Bank among the notable pioneer issuers so far. The blockchain-powered platform for such bonds offers quicker settlement as it bypasses clearing systems, while coupon payments are also made faster.

Joseph Chan, Hong Kong’s Acting Secretary for Financial Services and the Treasury, said in a recent statement that the planned tokenised green bond will be a pilot issuance to test out the compatibility of the city’s existing legal and regulatory framework, financial infrastructure, and market operational practice with tokenised issuances. Bond tokenisation has the potential to enhance the efficiency and reduce the cost of bond issuance and settlement, he added.

Hong Kong has been pursuing a plan to become Asia’s digital-asset capital, including a licencing programme for crypto platforms set to be enforced in March that will allow retail trading.

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The planned note sale also continues Hong Kong’s efforts to become a hub for sustainable financing. The city just sold its largest-ever green deal last month, issuing the equivalent of US$5.8 billion of green bonds denominated in three currencies. BLOOMBERG