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On 28 November 2024, the Hong Kong Monetary Authority (“HKMA”) has officially launched the Digital Bond Grant Scheme (“DBGS”), a key initiative announced in the 2024 Policy Address. The scheme aims to accelerate the development of the digital securities market and encourage the adoption of tokenisation technology in capital market transactions. By providing financial incentives to eligible issuances, the DBGS seeks to position Hong Kong as a global leader in digital finance.
- Financial Support for Digital Bond Issuances
The DBGS offers funding to cover 50% of eligible expenses for digital bond issuances, up to:
| Type of grant | Amount | Conditions |
| Half Grant | HK$1.25 million | If the issuance meets the basic requirements (as discussed below) |
| Full Grant | HK$2.5 million | If the issuance meets the basic requirements and all additional requirements (as discussed below) |
To ensure a broad distribution of resources, each issuer and its associates can receive subsidies for a maximum of two digital bond issuances.
- Basic Eligibility Requirements
To qualify for the scheme, digital bonds must meet the following criteria:
(1) The bond must be issued in Hong Kong, with at least 50% of the lead arrangers recognised as Hong Kong-based; and
(2) The issuance must either:
– involve a digital team with substantial operations in Hong Kong (assessed based on factors such as team size, composition, and seniority); or
– take place on a distributed ledger technology (“DLT”) platform operated by the Central Moneymarkets Unit (“CMU”).
- Additional Criteria for Full Grant
Issuances seeking the Full Grant must meet the following additional requirements:
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(1) DLT Platform: The bond must be issued on a distributed ledger technology platform independent of the issuer.
(2) Issuance Size: The bond must have a minimum issuance size of HK$1 billion.
(3) Investor Distribution: The bond must be distributed to at least five investors unaffiliated with the issuer or the platform provider.
(4) Listing Requirements: The bond must be listed on either (i) The Stock Exchange of Hong Kong Limited (“SEHK”); or (ii) a virtual asset trading platform (“VATP”) licensed by the Securities and Futures Commission (“SFC”).
- Reimbursement of Eligible Expenses
The scheme also provides reimbursement for various issuance-related costs, including fees paid to DLT platform providers, arrangers, legal advisers, auditors, accountants, and rating agencies, provided these service providers are based in Hong Kong and are independent of the issuer. Listing fees for SEHK or SFC-licensed VATPs, as well as lodging and clearing fees charged by the CMU, are also covered under the scheme.
- Coordination with Green and Sustainability Bonds
For issuances classified as green, social, sustainability, or transition bonds, the DBGS may work in conjunction with the GSF Grant Scheme to cover issuance costs. However, issuers must ensure that the same expenses are not claimed under both schemes, as dual funding for identical cost categories is prohibited.
- Application Process and Oversight
Applications for the DBGS are now open and will be accepted for the next three years. Detailed guidelines have been published by the HKMA, outlining the eligibility criteria, application process, and reimbursement procedures. The HKMA has also indicated that it will monitor market developments closely and may refine the scheme’s structure if necessary. All decisions regarding eligibility and subsidy amounts will be at the sole discretion of the HKMA.
- Conclusion
The launch of the DBGS underscores Hong Kong’s commitment to advancing its position as a global leader in digital securities. By fostering innovation and promoting tokenisation technology, the scheme is expected to attract issuers and investors, contributing to the long-term development of the city’s capital markets.
Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.
This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.