Asia is a leader in the development of the digital bond market, transforming traditional bonds through blockchain technology. This shift promises greater efficiency, transparency, and accessibility, making it easier for investors to participate and for issuers to manage bonds. As countries across the region adopt fintech innovations, digital bonds are becoming an essential tool to enhance market liquidity and reduce costs.

An emerging asset class, a digital bond is a type of bond issued and managed using blockchain technology or digital platforms. They leverage blockchain for secure and transparent transactions, often incorporating smart contracts to automate processes. Digital bonds offer efficiency, transparency, and accessibility, streamlining issuance and trading while providing a clear record of ownership and transactions on a decentralized ledger.

Over the course of 2024, there were several notable digital bond issuances coming out of the region. The Hong Kong government, for example, issued its second digital green bond in February, raising around HK$6 billion ( US$774 million ) in multiple currencies. Unlike previous digital bond deals, which were bilaterally done or placed to a small group of investors, this sovereign issuance was market-driven, involving a wide spectrum of institutional investors globally, including asset managers, insurance companies and private banks.

In a similar fashion, the Philippines launched its first-ever tokenized treasury bonds in November 2024 to raise 10 billion pesos ( US$179 million ) from the domestic market. The initiative was part of the Bureau of the Treasury’s broader agenda to promote financial inclusion and democratize investment through digital technology. By streamlining settlement procedures and minimizing friction costs, the tokenized bonds sought to make it easier for a wider range of investors to participate in the bond market.

Also in the past year, the Asian Infrastructure Investment Bank ( AIIB ) issued a digital native note ( DNN ) using Euroclear’s Digital Financial Market Infrastructure ( D-FMI ) platform, raising US$300 million in August and another US$200 million in October. This was the first-ever issuance from an Asian issuer on the D-FMI platform.  

Non-SSA ( supranational, sub-sovereign and agency ) issuers were also active in 2024. Last October HSBC issued a HK$1 billion ( US$128.6 million ) digital note, the first issued by a Hong Kong company and the first under English law in the city. The digital bond was settled within a two-day window.

Zhuhai Huafa Group, a stated-owned enterprise based in Guangdong province, issued a digital native bond to raise 1.4 billion yuan ( US$194 million ) from investors. It was the first digital bond issued by a Chinese non-financial enterprise and also the first offshore digital bond issuance by a Chinese company.

“By digitalizing the whole bond issuance process, it basically eliminates a lot of human error, especially on the settlement side,” shares a debt capital markets banker at an international bank. “The vision is really on the secondary market where bonds can be traded in the form of tokens as well as on the blockchain. Wouldn’t be surprised about seeing new issuance coming out in 2025.”

Key to allowing more efficient digital bonds into the market is government support and guidance. The Hong Kong Monetary Authority ( HKMA ), for example, recently launched its Digital Bond Grant Scheme ( DBGS ) to support potential digital bond issuers by subsidizing eligible expenses up to HK$2.5 billion per issuance. Issuers who want to avail themselves of the DBGS need to issue their digital bond in Hong Kong and either have a digital team with a substantial presence in the city or issue the digital bond on a distributed ledger technology platform operated by the HKMA’s Central Moneymarkets Unit.

The adoption of digital bonds in Asia is driven by several factors. Firstly, digital bonds offer cost savings by reducing underwriting fees and borrowing costs. Secondly, they enhance market liquidity and accessibility, allowing a broader range of investors to participate. Thirdly, the use of blockchain technology ensures greater transparency and security in bond transactions.