Can Hong Kong entice Southeast Asian savers to put money into stablecoin merchandise which might be actually worthwhile? Can it join China's industrial property to international capital via compliant digital packaging? Can it incubate a brand new era of RWA merchandise that aren’t solely authorized and compliant, but in addition actually in demand in the market?
Editor’s notice: On July 3, the South China Morning Publish web site revealed an article by Cobo COO Lily Z. King, which deeply analyzed how Hong Kong can seize the initiative in the international tokenization competition. The article identified that as the tokenization of actual world property (RWA) accelerates into the mainstream, Hong Kong is constructing a brand new era of monetary infrastructure with a transparent regulatory framework, open market technique and lively coverage innovation. In the second half of this competition, the key will now not be coverage steering, however whether or not the product actually meets market demand.
Lily Z.King at the Deloitte Digital Asset Discussion board in Hong Kong on July 8
Contributors included officers from the Hong Kong Monetary Providers and Treasury Division, the Securities and Futures Fee, the Legislative Council and the Hong Kong Financial Authority, in addition to business our bodies.
When BlackRock Chairman Larry Fink wrote in his annual letter to shareholders, “Each inventory, each bond, each fund — each asset can be tokenized,” he was not predicting some distant transformation however a shift that’s already underway — an evolution that’s reshaping how capital is fashioned, how property are distributed, and how monetary alternative is accessed.
At the core of this revolution is an idea that was as soon as area of interest however is now quickly coming into the mainstream: the tokenization of real-world property (RWA). At the moment, greater than $24 billion of RWA is circulating on the public chain, protecting yield-bearing U.S. bonds, non-public credit score swimming pools, tokenized commodities and actual property, and many others. What was as soon as seen as a “cryptocurrency experiment” is now changing into half of the international monetary infrastructure – the underlying pipeline of the capital market is quietly being reconstructed.
So the query is now not whether or not tokenization will reshape finance, however who will form it.
In the “Coverage Assertion on Digital Asset Improvement 2.0” launched on June 26, Hong Kong expressed its intention to guide.
The assertion launched the “Leap” regulatory framework, increasing the scope of supervision to stablecoin issuers, custodians and RWA platforms. Extra importantly, it sends a transparent sign: Hong Kong is not only “permitting tokenization, however actively advocating tokenization.”
“Leap” is the abbreviation of “Authorized” for “Authorized Simplification”, “Increasing Tokenized Merchandise”, “Advancing Utility Situations” and “Individuals and Partnership”. It promotes a broader imaginative and prescient by formulating a stablecoin license system, clarifying the regulatory framework for tokenized ETFs, and persevering with earlier pilot tasks in digital bonds and inexperienced finance, encouraging the tokenization of varied property starting from treasured metals to renewable vitality infrastructure.
However maybe the most significant change isn’t what the coverage particularly regulates, however how it defines tokenization—as a core pillar of the new monetary infrastructure somewhat than a sandbox experiment. This alone has set Hong Kong aside from different markets.
In distinction, Singapore has adopted a extra cautious strategy, specializing in institutional participation and limiting retail traders, whereas Hong Kong has chosen a broader and extra inclusive path. It permits retail customers to take part below the premise of setting clear suitability guidelines, thus increasing the potential market area.
In comparison with the EU’s prescriptive crypto asset market construction and the fragmented regulatory tug-of-war in the United States, Hong Kong gives a extra unified, principles-based system that gives the readability that innovators and traders want.
Nevertheless, simply because the tracks are laid doesn’t imply the trains will run on time. It’s simple to situation a tokenized asset, however the problem lies in whether or not anybody is prepared to carry, commerce and belief it.
Jeremy Allaire (third from left), CEO and co-founder of Circle Web Group, one of the world's largest stablecoin issuers, and Heath Tarbert (second from left), President of Circle, at the New York Inventory Trade on the day of the firm's preliminary public providing on June 5.
Picture: Reuters
Too many tokenized tasks realized this the onerous manner: the know-how labored, however the market didn’t purchase it. Missing distribution channels, market demand, or sensible relevance, many merchandise merely obtained shelved. The bottleneck isn’t know-how or regulation, however whether or not the enterprise worth really exists. The true check is whether or not a tokenized asset really solves an issue for a well-defined person group.
After all, there are tasks which have handed this check and efficiently expanded. For instance, tokenized U.S. Treasury merchandise have gained widespread adoption amongst savers round the world as a result of they supply secure and clear yields, particularly in rising markets that lack protected earnings channels.
For instance, protocols comparable to Maple Finance have opened up new paths in the non-public lending sector by matching institutional debtors with crypto-native lenders and implementing clear danger management on the chain, making the product bidirectionally accessible.
These successes don’t come from novel know-how, however from the good match of property, customers and packaging strategies.
Hong Kong’s native ecosystem can also be evolving on this course. The Hong Kong Financial Authority’s “Mission Ensemble” is experimenting with tokenized bonds, funds, carbon credit, charging pile infrastructure, and provide chain finance. These tasks have nice potential, however there aren’t any blockbuster tasks that can actually join the three parts of property, audiences, and utilization situations on a big scale.
All the parts are in place, and what’s wanted subsequent is “market traction”. Hong Kong has laid a stable basis: credible tasks with clear regulation, institutional recognition, and public-private collaboration are continually advancing. Hong Kong is more and more seen as a protected and clearly structured digital asset experimental surroundings, coupled with its potential as a “bridgehead” for China’s digital asset technique, making its significance far past the native market itself.
However the hardest half has simply begun. The subsequent stage of competition will likely be decided by “product-market match” somewhat than extra insurance policies. Can Hong Kong entice Southeast Asian savers to put money into actually worthwhile stablecoin merchandise? Can China’s industrial property be related to international capital via compliant digital packaging? Can a brand new era of RWA merchandise that aren’t solely authorized and compliant, but in addition have actual market demand be incubated?
These questions will decide whether or not RWA is only a development or a long-lasting change; they may even decide whether or not Hong Kong can change into the international tokenization capital of this new period. If profitable, Hong Kong is not going to solely be a frontrunner, but in addition one of the definers of the future monetary kind.
