By Lola Wang & Jason Jiang, OKG Analysis
U.S. President Donald Trump lately introduced the launch of his private meme coin, $Trump, on social media, as soon as once more drawing world traders’ consideration to the crypto market. After he returns to the White Home, Trump might 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, lately acknowledged, “Trump is signaling that America is again. We’re prepared to steer 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 property 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 expertise. These efforts sign Hong Kong’s ambition to reshape its monetary competitiveness by way of tokenization and acquire a strategic edge in future world finance.
Nonetheless, the first driver of world tokenization stays the U.S., the place Wall Road establishments are pioneering the mixing of conventional finance with blockchain. The approval of Bitcoin spot ETFs has funneled institutional capital on-chain, whereas tokenization accelerates the migration of monetary property and operations onto blockchain networks. Main gamers like BlackRock, Goldman Sachs, and JPMorgan are main this tokenization wave, with world 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 supply a globally influential tokenization initiative. Whereas regulatory help is powerful, conventional monetary establishments stay cautious, largely in a wait-and-see mode. This hesitancy, pushed by compliance issues, 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, might quickly scale and even create an “on-chain Nasdaq”, considerably increasing the tokenized asset market. This underscores the need of lively 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 modern pilot tasks. To keep away from fragmentation, Hong Kong might combine stablecoin and DLT initiatives right into a unified sandbox, permitting establishments to freely discover tokenization functions — from funds and equities to different asset lessons.
By fostering an experimental atmosphere, establishments can progressively construct experience and confidence, resulting in broader adoption. With out lively 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 property, but Hong Kong’s present focus leans in the direction of non-financial property like renewable power and agricultural commodities. Whereas beneficial for long-term ecosystem progress, these property lack short-term market benefits.
As OKG Analysis has beforehand identified, completely different asset lessons will endure tokenization at completely different paces. Bonds and funds, which provide secure returns and huge market sizes, are essentially the most appropriate candidates for tokenization at this stage. The expertise gained from these standardized property will lay the groundwork for the tokenization of smaller, much less liquid, or technically advanced asset lessons.
To scale its RWA market, Hong Kong ought to prioritize the tokenization of standardized monetary property like bonds and funds, and leverage its strengths as a worldwide monetary, commerce, and delivery hub, deal with commerce and cross-border tokenization use instances to quickly broaden market dimension.
Whereas expertise alone doesn’t decide tokenization success, an open technological framework is crucial for fostering innovation. Some establishments have opted for personal blockchains resulting from regulatory issues, however main monetary and tech corporations are more and more embracing public blockchains.
Over 60% of tokenized bonds and funds at the moment are issued on public blockchains, which provide superior world liquidity and accessibility. Enhanced transparency and on-chain analytics enhance asset monitoring and compliance. Most tokenized property are nonetheless custodied off-chain, that means actual threat 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 is just not solely to speed up the migration of real-world property onto the blockchain but in addition to make sure that their worth is just not confined solely on-chain; finally, these property should serve and combine with the true 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 placing a stability between innovation and regulatory compliance — it should acquire a big aggressive edge within the tokenization house. Moreover, by capitalizing on the trillions of yuan in property out there from Mainland China, Hong Kong is well-positioned to determine a dominant position on this sector with immense progress potential. Based on estimates by Boston Consulting Group, Hong Kong’s potential tokenized asset market might attain HKD 36 trillion.
The time to behave is now. We sit up for seeing Hong Kong speed up its progress in RWA tokenization by 2025.
