As Hong Kong looks to establish itself as a global digital asset trading hub, the city is examining offering green bonds managed on a distributed ledger, after its first sale of similar notes earlier in the year.
According to sources with knowledge of the matter, the city’s government has hired HSBC Holdings Plc, Credit Agricole CIB, Bank of China (Hong Kong), Industrial and Commercial Bank of China (Asia) Ltd. and UBS Group AG, and tasked them with forming a working group to examine the feasibility of offering a fixed rate “digitally native” green bond issuance.
According to the sources, the recording and clearance of the notes would be performed through the use of a digital ledger technology platform which would be supplied by HSBC. The sources asked not to be identified due to the subject being a private matter.
The technology behind the move would be similar to how Bitcoin records its transactions, and its use would brings the bonds, as well as the parties involved onto one digital platform. The Hong Kong Monetary Authority noted that can “substantially reduce costs and delays in settlements, and further facilitate interactions.
Although still relatively new in the field, digital securities have been building in popularity of late. This month, Japanese issuer Hitachi Ltd. issued the largest digital corporate bond, when it sold a ¥10 billion ($70 million) green note. In October, a blockchain platform for digital note sales was launched by Euroclear.
However, some are warning the new technology is not entirely without risks. In a recent report, Moody’s Investors Service warned investors that digital bond platforms were relatively new and untested, and new laws or regulations could potentially have an impact on their operation, and it is possible they might prove susceptible to cyberattacks.
According to the sources, the new bonds which Hong Kong is looking at offering would have tenors of as much as two years, and be denominated in dollars, euros, offshore yuan and the Hong Kong dollar.
In February, in its issuance of debt, Hong Kong had issued HK$800 million ($102 million) of 365-day tokenized green notes.
