‘HK at forefront’ as digital asset market set to take off

The market for digital assets is poised to take off this year and Hong Kong is best placed to develop it further after putting in place substantial regulatory frameworks and scoring key transactions, according to HSBC.

“The market really is at its tidal point,” said John O’Neill, the bank’s global head of digital assets strategy.

“When we look back, we’ll say 2024 is the year this market really gets serious in terms of liquidity development. I can’t think of any financial centres better placed for this [than] Hong Kong.”

The Britain-based investment banker said Hong Kong had entered the next phase of development in the digital asset market, which was to achieve benchmark liquidity in both the primary and secondary markets.

“This is a market where people are open-minded,” O’Neill said during a panel discussion at the HSBC Global Investment Summit yesterday.

The city has been at the forefront in Asia in experimenting with different forms of digital currency and facilitating the blockchain ecosystem, enhancing the role of fintech in the financial hub.

The Hong Kong Monetary Authority (HKMA) last month initiated the second phase of a pilot programme to explore more retail use cases for a central bank digital currency and a wholesale pilot to support interbank settlements using tokenised money.

The government also completed the world’s first multicurrency digital bond offering of about US$750 million in February, while the HKMA’s Central Moneymarkets Unit and its external linkages with clearing houses have broadened the investor base and enhanced debt liquidity.

HSBC, the largest commercial bank in Hong Kong, has introduced tokenised gold to its retail customers as well in a joint effort with the government to make real-world assets available in digital form.

“That liquidity story we really feel we can bring on globally, and Hong Kong is the start with that development,” O’Neill said. “We think, in 2024, these kinds of assets will be as liquid as conventional assets.”

Yuval Rooz, co-founder and CEO of fintech firm Digital Asset, said utility was a critical part of the digital asset market.

“We are moving to a world that talks about the virtual world where every asset, whether it’s backed by something physical or a pure financial asset, is going to be digital, front and back, all the way from issuance throughout its entire life cycle,” Rooz said.

“Only if it actually delivers utility. If it doesn’t deliver utility, it will eventually die.”