By Lola Wang & Jason Jiang, OKG Analysis
U.S. President Donald Trump not too long ago introduced the launch of his private meme coin, $Trump, on social media, as soon as once more drawing international traders’ consideration to the crypto market. After he returns to the White Home, Trump may usher in a brand new period of U.S. crypto regulation, encouraging extra establishments to embrace the wave of crypto innovation. Coinbase Head of U.S. Coverage, Kara Calvert, not too long ago said, “Trump is signaling that America is again. We’re prepared to guide this business. For different international locations, this implies: watch out, otherwise you’ll be left behind.”
Tokenization is transitioning from idea to actuality, hailed by Boston Consulting Group (BCG) because the “third revolution in asset administration”, with explosive progress anticipated within the subsequent 5 years. OKG Analysis predicts that non-stablecoin tokenized belongings will surpass $30 billion by 2025.
As a worldwide monetary hub, Hong Kong is actively embracing the tokenization wave. The 2024 Coverage Tackle outlined initiatives to advertise RWA tokenization and digital foreign money ecosystem growth, whereas the Hong Kong Financial Authority (HKMA) launched a Digital Bond Grant Scheme to incentivize capital markets to undertake tokenization know-how. These efforts sign Hong Kong’s ambition to reshape its monetary competitiveness by way of tokenization and achieve a strategic edge in future international finance.
Nonetheless, the first driver of worldwide tokenization stays the U.S., the place Wall Road establishments are pioneering the combination of conventional finance with blockchain. The approval of Bitcoin spot ETFs has funneled institutional capital on-chain, whereas tokenization accelerates the migration of monetary belongings and operations onto blockchain networks. Main gamers like BlackRock, Goldman Sachs, and JPMorgan are main this tokenization wave, with international repercussions.BlackRock’s BUIDL tokenized U.S. Treasury funds have already surpassed $630 million. JPMorgan’s Onyx platform is spearheading tokenization for U.S. Treasuries and cash market funds.
In distinction, Hong Kong has but to provide a globally influential tokenization initiative. Whereas regulatory help is robust, conventional monetary establishments stay cautious, largely in a wait-and-see mode. This hesitancy, pushed by compliance considerations, limits Hong Kong’s skill to totally leverage its monetary sources for tokenization innovation.
Regulation ought to facilitate innovation, not hinder it. Institutional participation is essential for tokenization’s early progress. Coinbase’s proposed inventory tokenization plan, although nonetheless in its conceptual stage, may quickly scale and even create an “on-chain Nasdaq”, considerably increasing the tokenized asset market. This underscores the need of energetic institutional involvement to speed up adoption.
Given the present market construction, Hong Kong ought to implement a extra open tokenization sandbox to draw conventional establishments and encourage progressive pilot initiatives. To keep away from fragmentation, Hong Kong may combine stablecoin and DLT initiatives right into a unified sandbox, permitting establishments to freely discover tokenization purposes — from funds and equities to different asset courses.
By fostering an experimental atmosphere, establishments can regularly construct experience and confidence, resulting in broader adoption. With out energetic institutional participation, Hong Kong dangers falling behind because the U.S. quickly advances tokenization initiatives.
Past fostering market innovation, Hong Kong should refine its strategic focus for asset tokenization. Globally, tokenization efforts primarily goal standardized monetary belongings, but Hong Kong’s present focus leans in the direction of non-financial belongings like renewable vitality and agricultural commodities. Whereas helpful for long-term ecosystem progress, these belongings lack short-term market benefits.
As OKG Analysis has beforehand identified, completely different asset courses will bear tokenization at completely different paces. Bonds and funds, which supply secure returns and enormous market sizes, are essentially the most appropriate candidates for tokenization at this stage. The expertise gained from these standardized belongings will lay the groundwork for the tokenization of smaller, much less liquid, or technically advanced asset courses.
To scale its RWA market, Hong Kong ought to prioritize the tokenization of standardized monetary belongings like bonds and funds, and leverage its strengths as a worldwide monetary, commerce, and delivery hub, concentrate on commerce and cross-border tokenization use instances to quickly broaden market measurement.
Whereas know-how alone doesn’t decide tokenization success, an open technological framework is important for fostering innovation. Some establishments have opted for personal blockchains because of regulatory considerations, however main monetary and tech corporations are more and more embracing public blockchains.
Over 60% of tokenized bonds and funds are actually issued on public blockchains, which supply superior international liquidity and accessibility. Enhanced transparency and on-chain analytics enhance asset monitoring and compliance. Most tokenized belongings are nonetheless custodied off-chain, that means actual danger resides off-chain, whereas blockchains primarily guarantee regulatory compliance. Given these components, Hong Kong ought to actively discover public blockchain-based tokenization as a core innovation technique, making certain compliance whereas embracing the advantages of an open, permissionless ecosystem.
RWA tokenization represents the convergence of two distinct monetary methods. The perfect situation isn’t solely to speed up the migration of real-world belongings onto the blockchain but additionally to make sure that their worth isn’t confined solely on-chain; in the end, these belongings should serve and combine with the actual economic system.
As Wall Road establishments actively advance tokenization, the window of alternative for Hong Kong is narrowing. If Hong Kong can leverage its regulatory and market benefits to embrace innovation — whereas offering conventional monetary establishments with larger flexibility to experiment and hanging a steadiness between innovation and regulatory compliance — it can achieve a big aggressive edge within the tokenization area. Moreover, by capitalizing on the trillions of yuan in belongings out there from Mainland China, Hong Kong is well-positioned to determine a dominant function on this sector with immense progress potential. Based on estimates by Boston Consulting Group, Hong Kong’s potential tokenized asset market may attain HKD 36 trillion.
The time to behave is now. We look ahead to seeing Hong Kong speed up its progress in RWA tokenization by 2025.
