In a groundbreaking move, the Bank of China’s investment bank subsidiary BOCI has announced the issuance of 200 million Chinese Yuan ($28 million) worth of digital structured notes minted on the Ethereum blockchain. This makes BOCI the first Chinese financial institution to issue a tokenized security in Hong Kong. Investment banking company UBS played a crucial role in originating the product for placement to clients in the Asia-Pacific region.
Ying Wang, deputy CEO of BOCI, expressed her excitement about the development: “Working together with UBS, we are driving the simplification of digital asset markets and products, for customers in Asia Pacific through the development of blockchain-based digital structured products, designed specifically for customers in Asia Pacific.” At the same time, UBS has been expanding its tokenization across structured products, fixed income, and repo financing.
This move comes after Hong Kong opened crypto exchange access for retail users on June 1. Shortly after, the special administrative region has indicated that it is “actively participating” in the blockchain industry and aims to establish a framework for stablecoin regulation within one year. Hong Kong has also issued an 800 million HKD green bond tokenized on Goldman Sachs’ tokenization protocol GS DAP with an annual yield of 4.05% in February this year.
While this development is a positive indication of the potential of blockchain technology in the financial sector, a few concerns persist. The securitized tokens are governed by Hong Kong and Swiss law, which might raise some issues about regulatory clarity and compliance. Additionally, the use of Ethereum as the underlying technology exposes the investment product to the potential fluctuations and vulnerabilities in the Ethereum network.
Nevertheless, this innovative move by BOCI and UBS signifies the growing interest of traditional financial institutions in digital assets and blockchain technology. It highlights the potential of tokenized securities in promoting efficiency, transparency, and access to a wider range of investors. As more traditional financial institutions and regulatory bodies involve themselves in the emerging blockchain markets, it is crucial to strike a balance between innovation and risk management to navigate any potential pitfalls.
Source: Cointelegraph
