The Securities and Futures Commission (SFC) is pleased to announce a step forward in the realm of asset management, as one of the Project Ensemble Sandbox participants – a financial institution – successfully completed a first-of-its-kind simulation of the dealing and trading process of a tokenised money market fund (MMF) using tokenised deposits (TD) within the Sandbox environment.
Following the launch of the Project Ensemble Sandbox in August 2024 (Note 1), the SFC has been working closely with Hong Kong Monetary Authority (HKMA) in which the SFC provides regulatory guidance to Sandbox participants to support their experimentation on tokenisation use cases under different themes. The SFC has also been co-leading with the HKMA to advance the tokenisation initiatives within the asset management sector.
Specifically, a financial institution – a local bank – has partnered with its own asset management arm and trustee business, and successfully completed in the Sandbox a simulation of delivery-versus-payment settlement of a tokenised MMF using TD. The simulation covered subscription, redemption and trading of the tokenised fund unit for its institutional clients, as well as cross-bank settlement of the tokenised fund unit using TD. This pilot test would pave the way for further exploring atomic settlement (Note 2) of tokenised funds and money on a 24/7 basis in real-world business scenario, which could increase operational efficiency, reduce costs and appeal to international investors across various time zones.
Ms Christina Choi, the SFC’s Executive Director of Investment Products, said, “The progress made by Sandbox participants provide valuable insights for regulators and industry players on how advanced applications of tokenisation in asset management can be implemented in practice down the road to achieve scale and tangible economic benefits.”
The SFC remains committed to building the tokenisation ecosystem in Hong Kong and working with the HKMA and Sandbox participants to further develop use cases. At the same time, the SFC has been engaging and will continue to engage asset managers on their product tokenisation initiatives to facilitate their timely launches.
Notes:
- SFC welcomes launch of Project Ensemble Sandbox as key step in Hong Kong’s tokenisation development (28 August 2024), available here.
- Atomic settlement generally refers to a process in which transactions are settled instantly, simultaneously and irrevocably.
