Tokenisation Of Real Estate In Hong Kong – Opportunities And Limitations.

Tokenisation and Real Estate in Hong Kong 

• Hong Kong’s property market is undergoing a period of transformation. As part of the city’s broader push to improve liquidity and modernise its financial infrastructure, tokenisation technology is emerging as a key tool for unlocking liquidity, improving transaction efficiency, and investor accessibility. 

• The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) are actively developing frameworks to support tokenised assets, including real estate-backed tokens. Various circulars and guidance notes have been issued by the HKMA and SFC in recent years to clarify how tokenised products should be treated under existing laws. 

• The HKMA has launched a regulatory testing platform (the Sandbox) to accelerate the adoption of tokenised financial assets and digital money in Hong Kong. Real estate is one of the four areas included in the Sandbox’s initial phase. This signals institutional support for the digitisation of property assets and the integration of tokenised real estate into Hong Kong’s financial ecosystem. The Sandbox provides a controlled environment for financial institutions to test the settlement of tokenised assets using wholesale central bank digital currency (wCBDC) and tokenised deposits. The Sandbox supports payment-versus-payment (PvP) and delivery-versus-payment (DvP) mechanisms, which are designed to facilitate simultaneous settlement of money and assets. 

Fractional Ownership and Liquidity 

• Tokenisation enables fractional ownership of real estate assets, allowing investors to acquire small units of high-value properties. This lowers the entry barrier for participation and opens the market to a broader pool of investors, including retail and overseas participants. It also facilitates 24/7 trading on regulated digital asset platforms, improving liquidity and market depth. 

• Blockchain-based smart contracts can automate key processes such as rental income distribution, compliance checks, and ownership transfers. These efficiencies reduce reliance on intermediaries and lower transaction costs, particularly in commercial property transactions. 

• Blockchain’s immutable ledger also enhances transparency in ownership records and transaction history. This reduces the risk of fraud and improves investor confidence, particularly in cross-border transactions where verification of title and ownership is critical. 

• In August 2025, the SFC approved Hong Kong’s first tokenised real estate investment fund (REIF). The fund allows qualified investors to acquire fractional interests in commercial and residential properties via blockchain-based tokens. This model operates under existing collective investment scheme regulations and may serve as a blueprint for future tokenised offerings in infrastructure, green finance, and cross-border investment. 

Legal, Regulatory and Other Considerations 

• Tokenisation of real estate introduces risks such as regulatory uncertainty, cybersecurity threats, and market volatility despite the benefits of increased liquidity and accessibility. The key risks associated with real estate tokenisation are as follows: 

• The SFC treats tokenised property interests as traditional securities with a tokenisation wrapper. As such, they are subject to the same legal and regulatory requirements as conventional securities under the Securities and Futures Ordinance (Cap. 571). This includes:  

• Licensing obligations for intermediaries 

• Prospectus requirements under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) 

• Disclosure and investor protection measures 

• However, real estate tokenisation is not explicitly regulated as a separate asset class and there is presently no clear dedicated legal framework for tokenised property interests in Hong Kong and many jurisdictions have not yet defined how tokenised assets should be regulated, leading to potential compliance issues. 

Land Registry and other Limitations 

• Hong Kong’s current land registration system, governed by the Land Registration Ordinance (Cap. 128), does not support fractional or tokenised ownership. 

• The Land Titles Ordinance (Cap. 585), which introduces a title registration system, is expected to commence in 2027. However, it will initially apply only to “new land” granted after commencement. Until then, tokenised property interests must be structured through alternative legal vehicles such as corporate entities or trusts. 

• Smart contracts used in tokenised transactions must be backed by enforceable legal documentation. The SFC requires intermediaries to disclose whether smart contract audits have been conducted and to maintain business continuity plans to address potential failures or vulnerabilities. Bugs or flaws in smart contracts may lead to loss of funds or unauthorized access. 

• Tokenised property offerings to the public must comply with Hong Kong’s public offering regime. Unless authorised by the SFC or accompanied by a compliant prospectus, such offerings can only be made to professional investors or under applicable exemptions. 

Conclusion 

Tokenisation presents a compelling opportunity to reshape how real estate is owned, traded, and financed in Hong Kong. However, the legal and regulatory landscape remains uncertain and complex. Stakeholders must navigate existing securities laws, land registration limitations, and custodial requirements while preparing for future reforms.