Bank of China's BOCI Issues Tokenized Securities on Ethereum

Hong Kong and China Crypto Policy Updates: Navigating Amidst Global Uncertainty

Written by Van

Bank of China's investment bank subsidiary BOCI issued 200 million Chinese yuan ($28 million) worth of digital structured notes on the Ethereum blockchain. BOCI becomes the first Chinese financial institution to issue a tokenized security in Hong Kong, with assistance from UBS in originating the product for placement in the Asia-Pacific region. UBS has been actively expanding its tokenization efforts across structured products, fixed income, and repo financing, following its issuance of a $50 million tokenized fixed-rate note in December 2022.

Hong Kong Expands Crypto Accessibility and Invites Coinbase Amidst Regulatory Turbulence

Hong Kong, an increasingly crypto-friendly jurisdiction, has witnessed significant policy updates. On June 1, the government opened crypto exchange access for retail users, marking a pivotal moment in expanding crypto accessibility. Additionally, Hong Kong aims to establish a stablecoin regulatory framework within one year and has already issued an HK$800 million green bond tokenized on Goldman Sachs' protocol GS DAP, offering an annual yield of 4.05%. The introduction of two exchange-traded funds for cryptocurrency futures further demonstrates Hong Kong's commitment to embracing crypto, raising over $70 million before their launch.

Amidst regulatory turbulence faced by US-based exchanges, Hong Kong's Legislative Council member Johnny Ng has extended an invitation to Coinbase and other digital asset companies to relocate to Hong Kong. This comes in the wake of lawsuits filed by the US SEC against Binance and Coinbase. Hong Kong has recently introduced a licensing process for trading platforms and exchanges through the Securities and Futures Commission (SFC), with plans to allow retail trading of digital assets later this year. Over 80 companies have expressed interest in obtaining licenses, with Hong Kong striving to ensure robust investor protection and effectively manage risks within the crypto industry.

Johnny Ng Kit-Chong, a member of Hong Kong's Legislative Council, envisions a significant need for 50,000 to 100,000 Web3 positions to be filled in the coming years. Hong Kong's ambitious plan includes incubating 1,000 Web3 firms within three years, already surpassing expectations with over 400 firms registering within four months. While Hong Kong maintains relatively open policies for token issuance in certain sectors, regulatory oversight applies to token sales involving securities or futures components. Ng's deep involvement in the Web3 space positions him as an advocate for pro-Web3 regulations within the Special Administrative Region (SAR).

China's Potential Stimulus Package and Digital Yuan Innovations

Discussions are underway regarding a potential stimulus package aimed at bolstering China's economy, according to Lex Moskovski, a successful entrepreneur from Vancouver, Canada, working in the fintech and digital world. The package, which may include measures supporting real estate and domestic demand, has the potential to direct funds toward "unregistered securities" such as altcoins. The scope and composition of the stimulus plan will determine its impact on Bitcoin and the broader crypto market. 

Notably, Hong Kong's recent opening of cryptocurrency trading has been viewed positively, with anticipation surrounding the "China effect" on the crypto market once exchange registrations gain momentum. Historical patterns indicate that major monetary stimulus has had discernible effects on Bitcoin, leading to increased trading volumes and purchases.

Meanwhile, the Chinese city of Changsha is introducing offline digital yuan "hard wallets" targeting elderly citizens and children. Recognizing varying smartphone ownership levels between urban and rural areas, these "hard" wallets can be used with IC cards, 2G phones, wearable devices, and IoT devices. Changsha, along with state-run banks, is promoting adoption in nearby villages, offering a convenient and secure means of electronic payment. Innovative application scenarios are expected to increase as the pilot progresses, with Chinese charities accepting digital yuan donations and IT firms receiving bank loans via digital yuan wallet transfers.

However, as the digital yuan gains momentum, Chinese police have issued warnings about an increase in digital yuan-themed scams. Scammers are creating deceptive apps using digital yuan logos to defraud individuals into believing they can make easy money. These scams infiltrate public group chats, offering fake digital yuan credit lines for e-commerce platforms. Chinese citizens are advised to exercise caution and only use digital yuan-themed apps distributed by the People's Bank of China or major state-run banks.

Bitcoin Shifts Eastward: On-chain Data Shows Outflows from the West to the East

Amidst these global developments, Bitcoin and the wider cryptocurrency market have experienced selling pressure in response to the SEC's lawsuits against Binance and Coinbase. On-chain data from Glassnode reveals a gradual shift of Bitcoin outflows from the West to the East over the past year, reflecting a decrease in US supply dominance and an increase in Asian trading hours. Tether (USDT) has gained popularity in countries with weak currencies and stringent US regulations, prompting individuals to seek alternative destinations, particularly in the East.

FAQ about China and Hong Kong’s Crypto Policy Updates

Q: What type of securities did Bank of China's investment bank subsidiary BOCI issue on the Ethereum blockchain?

A: BOCI issued tokenized digital structured notes worth 200 million Chinese yuan ($28 million) on the Ethereum blockchain.

Q: Which financial institution became the first Chinese entity to issue a tokenized security in Hong Kong?

A: Bank of China's investment bank subsidiary BOCI became the first Chinese financial institution to issue a tokenized security in Hong Kong.

Q: What are the recent policy updates regarding crypto in Hong Kong?

A: Hong Kong has opened crypto exchange access for retail users and aims to establish a stablecoin regulatory framework within one year. Additionally, it has introduced a licensing process for trading platforms and exchanges through the Securities and Futures Commission (SFC).

Q: How many Web3 positions does Johnny Ng Kit-Chong envision needing in the coming years?

A: Johnny Ng Kit-Chong envisions a significant need for 50,000 to 100,000 Web3 positions to be filled in the coming years.

Q: What precautions should Chinese citizens take regarding digital yuan-themed scams?

A: Chinese citizens are advised to exercise caution and only use digital yuan-themed apps distributed by the People's Bank of China or major state-run banks to avoid falling victim to digital yuan-themed scams.

Conclusion

As the crypto landscape evolves, the regulatory developments in Hong Kong and China stand as noteworthy indicators of the region's commitment to embracing and shaping the future of digital assets. With Hong Kong's proactive policies, including licensing frameworks and accessibility expansions, and China's explorations of metaverse technologies, both jurisdictions are positioning themselves as influential players in the global crypto ecosystem.

This article has been refined and enhanced by ChatGPT.