Hong Kong to Ease DLT Bond Rules After Legal Review

Hong Kong regulators confirmed the city's legal framework can handle tokenised bond issuances, clearing the way for broader use of distributed ledger technology in fixed income markets.

The Hong Kong Monetary Authority and the Financial Services and the Treasury Bureau completed the first phase of a review on DLT adoption. Findings showed existing law is flexible enough to support representing traditional bonds as digital tokens on a blockchain, according to a joint announcement.

The Companies Registry issued FAQs affirming that maintaining a register of debenture holders via DLT meets record-keeping requirements under the Companies Ordinance. That removes a key legal uncertainty for issuers.

A second phase begins in the second half of the year. Authorities plan to examine electronic execution of issuance documents for tokenised bonds, including recognising electronic signatures in the creation of trusts for tokenised bonds and funds. The review will also consider new concepts of possession and transfer for tokenised fixed income instruments.