Hong Kong Launches Third Tokenised Bond, Eliminates ETF Stamp Duty

Hong Kong has made a significant stride in its digital finance initiatives with the launch of its third tokenised bond and the elimination of stamp duty on ETFs. This dual announcement underscores the region's commitment to becoming a global leader in Web3 finance through the tokenisation of assets and the adoption of blockchain technology.

The new tokenised bond is designed to attract both institutional and retail investors by offering tax breaks, which are intended to stimulate market activity and innovation. This move aligns with Hong Kong’s updated digital asset agenda, “Policy Statement 2.0,” released in late June. The policy outlines the “LEAP” framework, focusing on Legal streamlining, Expanding tokenized products, Advancing use cases, and People and partnership development. This comprehensive approach aims to create a robust virtual asset ecosystem that fosters market innovation while ensuring regulatory compliance.

In addition to the tokenised bond, Hong Kong is set to activate its stablecoin licensing regime on August 1. This move, confirmed by the Secretary for Financial Services and the Treasury, underscores the region’s commitment to building a comprehensive virtual asset ecosystem. The new regulations require any entity issuing fiat-referenced stablecoins in Hong Kong to acquire a license from the Hong Kong Monetary Authority (HKMA). Stablecoins must be fully backed by reserves of high-quality, liquid assets to protect investors and ensure financial stability.

The push for a regulated stablecoin market is coupled with a significant focus on tokenizing real-world assets (RWA). The government plans to regularize the issuance of tokenized government bonds and promote the tokenization of other assets, such as precious metals, to improve liquidity and market access. To support this, the Financial Services and the Treasury Bureau, and the HKMA are conducting a legal review to streamline regulatory processes for tokenized instruments.

To further develop the market, authorities have clarified the stamp duty treatment for tokenized ETFs to encourage secondary market trading. They are also drafting regulations for tax incentives on profits from certain blockchain activities. Major tech firms have already signaled their intent to apply for a stablecoin issuance license once the new regime is active, indicating strong industry support for these initiatives.

The elimination of stamp duty on ETFs is a strategic move to attract more investors to the region’s financial markets. This tax break is expected to boost liquidity and market activity, making Hong Kong a more competitive destination for financial services. The combination of tokenised bonds, stablecoin regulations, and tax incentives positions Hong Kong as a forward-thinking region in the global financial landscape, poised to lead the way in Web3 finance and blockchain adoption.