Hong Kong Launches Digital Bond Grant Scheme to Boost Tokenisation in Capital Markets
On 28 November 2024, the Hong Kong Monetary Authority (HKMA) unveiled detailed guidelines for the Digital Bond Grant Scheme (DBGS). Initially announced in the Chief Executive’s 2024 Policy Address on 16 October 2024, the DBGS aims to promote the adoption of tokenisation technology in capital market transactions by encouraging its use among financial institutions and issuers.
The HKMA will begin accepting applications on 28 November 2024 for an initial three-year period. Eligible applications can be submitted for bonds issued on or after the Policy Address announcement on 16 October 2024.
Global law firm, Linklaters in their update (also available attached), have outlined further details of the DBGS and key considerations that issuers, lead arrangers and DLT platform providers interested in the DBGS should take note of:
- There is a maximum subsidy under the DBGS of two digital bond issuances per issuer (including its associates).
- If the digital bond is also a green, social, sustainability, sustainability-linked or transition bond, subject to meeting the eligibility requirements under the applicable grant scheme(s), (i) the eligible general bond issuance costs can be covered by either the DBGS or Track I of the GSFGS, up to HK$2.5 million, but not both; (ii) the external sustainability review costs can be covered by Track II of the GSFGS, up to HK$800,000 for all pre-issuance and post-issuance external reviews combined.
- A pre-application consultation is available. Prior to or after the issuance, the issuer, the lead arranger(s) and/or the DLT platform provider(s) may initiate a pre-application consultation with the HKMA before submitting the formal application.
- A formal application may be made by the issuer, the lead arranger(s) and/or the DLT platform provider(s) within three months after the digital bond is issued.
