The Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority have concluded the first phase of their review of further adoption of distributed ledger technology in Hong Kong's fixed income market. The review found that Hong Kong's legal and regulatory environment is already sufficiently flexible for tokenised bond issuances, and the authorities will move to a second phase in the second half of the year to examine legislative changes needed to support wider use of DLT in fixed income and digital assets. As an initial follow-up, the Companies Registry has issued frequently asked questions confirming that a register of debenture holders maintained using DLT can satisfy the record-keeping requirements under the Companies Ordinance. The review also identified legal issues that warrant further clarification and enhancement, despite the experience from the government's three tokenised bond issuances and a growing number of corporate deals, including from Asian and Middle Eastern issuers. Areas for the next phase include allowing electronic execution of issuance documents for tokenised bonds, including recognition of electronic signatures in creating trusts linked to tokenised bonds and funds, and examining how concepts such as possession and transfer should apply to tokenised fixed income instruments. The next phase will also consider the implications of the government's broader digitalisation initiatives when assessing possible legal enhancements for DLT use in the fixed income market.

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