Hong Kong is considering offering green bonds managed on distributed ledger technology, the latest step in the city’s efforts to become a digital-asset hub, following its first sale of similar notes earlier this year.
The 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 to form a working group to explore the possibility of a multi-series fixed rate “digitally native” green bond issuance, according to people familiar with the matter.
The notes would be recorded and cleared using a distributed ledger technology platform provided by HSBC, the people said, asking not to be identified discussing a private matter.
Such technology — similar to the foundation upon which Bitcoin operates — would bring bonds as well as relevant parties and activities onto a single digital platform. That can facilitate interaction, “substantially” reduce costs and remove any settlement delays, according to the Hong Kong Monetary Authority.
Still relatively nascent, digital securities have gained popularity recently. Japanese issuer Hitachi Ltd this month sold the nation’s largest digital corporate bond with a ¥10 billion (RM3209.28 million) green note. Euroclear launched a blockchain platform for digital note sales in October.
New risks lurk. Moody’s Investors Service cautioned that digital bond platforms are relatively new and untested, could potentially be impacted by new laws or regulations, and could be more susceptible to cyberattacks.
The bonds that Hong Kong is considering offering may be denominated in dollars, euros, offshore yuan and the Hong Kong dollar, with tenors of up to two years, according to the people, Bloomberg reported.
The city issued HK$800 million (RM478.47 million) of 365-day tokenised green notes in February, in its debut issuance.
