The first retail-focused tokenized fund in the Asia-Pacific region launched in Hong Kong

On February 13, 2025, a well-known asset management company announced that its Hong Kong dollar digital currency fund received approval from the Hong Kong Securities and Futures Commission (SFC), becoming the first tokenized fund in the Asia-Pacific region aimed at retail investors. The fund was officially listed on February 28, marking a key breakthrough in the transition of tokenized assets from being exclusive to institutions to the mass market.

Characteristics of Tokenized Funds

Tokenization of funds refers to the conversion of fund shares into digital tokens on the blockchain. Although the investment nature is similar to traditional funds, it has innovations in ownership attribution, information transparency, and trading models.

1. Ownership: Achieve decentralized recording through blockchain technology, enhancing security.
2. Information Transparency: Transaction records are available for real-time inquiry, enhancing transparency.
3. Trading Model: Supports 24/7 trading, enhancing liquidity.
4. Smart Contract: Automates the execution of transactions and dividends, improving efficiency.

Overview of Hong Kong Dollar Digital Currency Fund

The fund primarily invests in HKD short-term deposits and high-quality money market instruments, supplemented by other money market instruments and money market funds. The fund offers three share classes: HKD, USD, and RMB.

Adopting a custodial tokenization model, with a well-known bank acting as the tokenization agent, digital platform operator, and token custodian, the technical implementation is completed through an internally authorized digital platform created by its subsidiary.

Subscription and Redemption Mechanism

Retail investors can only subscribe for or redeem tokenized shares in the form of tokens through qualified distributors. Currently, only one licensed cryptocurrency trading platform has been designated as a qualified distributor. The fund is only available to investors in the Hong Kong region.

Subscription Process:

1. Investors subscribe to fund Tokens through qualified distributors.
2. The distributor will notify the fund manager of the subscription application and make the payment.
3. The fund manager instructs the digital platform to mint tokens.
4. The token custodian will deposit the tokens into the distributor's blockchain wallet.
5. The distributor allocates tokens to investors.

Redemption process:

1. Investors apply to the distributor to redeem tokens.
2. The distributor notifies the fund manager of the redemption request.
3. The fund manager instructs the digital platform to destroy the corresponding Token.
4. The fund manager pays redemption income to the distributor.
5. The distributor pays the profits to the investors and deducts the custody tokens.

Industry Impact and Outlook

The launch of this tokenized fund marks an important breakthrough of Web3.0 technology in the financial sector, providing opportunities for retail investors to participate in blockchain assets. Although the current investment targets are still primarily low-risk money market instruments, there may be an expansion to a more diversified range of asset classes in the future.

With the maturation of blockchain technology and the improvement of the regulatory environment, it is expected that more tokenization funds will emerge, potentially offering higher yield products and more convenient trading methods. Asset tokenization is expected to become an important force in reshaping the global asset management landscape.