Bank of China Makes Blockchain History with Digital Structured Notes

Breaking New Ground in Blockchain Finance

In a remarkable move that has the financial sector buzzing, Bank of China’s investment banking arm, BOCI, has issued digital structured notes valued at 200 million Chinese yuan (approximately $28 million). This decisive step positions BOCI as the first Chinese financial institution to issue a tokenized security in the vibrant market of Hong Kong.

Partnering with UBS: A Strategic Collaboration

With investment banking giant UBS on board, BOCI is not just tiptoeing into the world of digital finance—it’s making a cannonball splash. UBS played a pivotal role in originating the product, aimed squarely at clients in the Asia-Pacific region. Ying Wang, BOCI’s deputy CEO, expressed enthusiasm over this collaboration, stating:

“Working together with UBS, we are driving the simplification of digital asset markets and products, for customers in Asia Pacific through the development of blockchain-based digital structured products, designed specifically for customers in Asia Pacific.”

UBS’s Expanding Tokenization Portfolio

UBS isn’t merely handing BOCI a life raft; they’re building an entire fleet of boats. The firm has been aggressively expanding its tokenization efforts across various areas, including structured products, fixed income, and repo financing. As a testament to their commitment, UBS also issued a $50 million tokenized fixed-rate note in December 2022, embracing innovation under English and Swiss law in a digitized format on a permissioned blockchain.

Hong Kong’s Crypto-Friendly Atmosphere

The Hong Kong crypto landscape is getting a makeover, following a series of favorable initiatives. Recently, on June 1, Hong Kong opened access to crypto exchanges for retail users, paving the way for an influx of participation in the blockchain industry. Just weeks after this opening, Joseph Chan Ho-lim, the under secretary for financial services and the treasury in Hong Kong, stated that the region is “actively participating” in the blockchain arena and is working to establish a regulatory framework for stablecoins within the following year.

Green Bonds and ETFs: The Future Is Bright

Alongside BOCI’s bold venture, Hong Kong has been similarly active in integrating blockchain into its financial offerings. In February 2023, the territory issued an HK$800 million green bond tokenized using Goldman Sachs’ GS DAP protocol, which boasts an attractive annual yield of 4.05%. Additionally, the introduction of two exchange-traded funds for cryptocurrency futures in late 2022 has already proven successful, raking in over $70 million prior to launch. With moves like these, it’s clear that Hong Kong aims to be a frontrunner in financial innovation.