In a statement, the two firms explained that when compared with traditional money market funds, these tokenized money market ETFs will not only improve transparency and efficiency through blockchain technology.
The world’s first tokenised money market exchange-traded funds (ETFs) are set to be launched in Hong Kong by Chinese fund house Bosera Asset Management (International) and cryptocurrency exchange operator HashKey Group. The money market is changing faster than one can keep up, and along with these changes, the value of money is also increasing.
The companies announced on Friday that two new tokenized share classes, Bosera HKD Money Market ETF and USD Money Market ETF, would be added to the existing money market ETFs, which is a low-risk, blockchain-based liquid investment option for both retail and institutional investors. The new ETFs have been approved by the Securities and Futures Commission (SFC) and will be launched next month.
Tokenisation is necessary to convert the rights of an asset, like a money market fund into a digital token, only after which it can be traded on a distributed ledger technology network. Money market funds invest in low-risk, short-term debt securities like commercial papers and treasury bills. Along with providing liquidity, they also preserve the capital invested and offer returns. Nearly identical benefits are offered by money market ETFs, other than the fact that they tend to possess higher trading flexibility on the stock exchange.
In a statement, the two firms explained that when compared with traditional money market funds, these tokenized money market ETFs will not only improve transparency and efficiency through blockchain technology. Through this, investors can directly access high-quality money market instruments using the tokens. Thus, meeting their asset allocation and risk management requirements.
Hong Kong was laying the foundation to become a global hub of digital and financial innovation. Last year, a sandbox for wholesale central bank digital currency (wCBDC) was launched, bringing the financial sector one step closer to introducing such a tokenised market which supports digital transactions. Five months before this, a pilot project which allows for seamless interbank settlement of tokenised money via wCBDC was set up, known as Project Ensemble was announced by the Hong Kong Monetary Authority (HKMA).
This sandbox initiative included 25 participants like note-issuing banks like HSBC, Standard Chartered and Bank of China (Hong Kong), and fintech and cryptocurrency firms like Ant Group and HashKey Group, amongst others. These newly introduced tokenised money market ETFs facilitate the tokenisation of real-world assets (RWA), bringing in new financial infrastructure which includes digital money and assets.
The South China Morning Post had reported last August, at the launch of the sandbox initiative that Eddie Yue Wai-man, CEO of HKMA remarked that tokenisation could make financial transactions more efficient, transparent and less expensive. Xiao Feng, chairman and CEO of HashKey said that bringing money market ETFs on-chain through blockchain technology is an important step to help traditional finance integrate with Web3, which is being hailed as the future of the internet. Web3 is a blockchain-based interweb which includes cryptocurrencies, NFTs and decentralised finances.
The advantages of such a tokenised money market are that the underlying assets are of mature and higher quality and that security and regulatory compliances are met, which reduces investor costs, ultimately improving liquidity. The two firms are hopeful that the success of this product will make RWA products more mainstream.
Tokenised money market ETFs are necessary to conjoin traditional finance and blockchain-driven finance, as it provides consistent returns to on-chain investors. According to Lian Shaodong, Chairman and CEO, Bosera, the firm prioritises financial innovation while simultaneously exploring changes in business models using the latest technological developments. As one of Hong Kong’s leading asset management companies, Bosera not only caters to established investors, who make up a traditional consumer base but also closely monitors the investment patterns and preferences of the younger generation like GenZ, assessing their on-chain demands.
This expands the firm’s target audience and makes adapting to changing trends and facilitating innovation much easier. These new changes in the money markets make it an exciting time for investors and financial enthusiasts who wish to popularise and make such financial infrastructure mainstream.