Harvest Global Investments (HGI) has issued the first fixed-income tokenized fund by a Chinese financial institution in Hong Kong.

The offering is managed by HGI, a Hong Kong-based, wholly owned subsidiary of Chinese investment manager Harvest Fund Management, with the tokenization solution provided by Meta Lab HK, a fintech start-up backed by Harvest Digital Assets.

The issuance of the tokenized fund comes after Hong Kong’s securities regulator, the Securities and Futures Commission (SFC), issued two circulars last November, one clarifying its expectations for regulated intermediaries engaging in activities related to tokenized securities and another setting out the requirements for the tokenization of authorized investment products.

The SFC says it recognizes the potential benefits of tokenization to financial markets, particularly in increasing efficiency, enhancing transparency, reducing settlement time, and lowering costs for traditional finance.

But the regulator is also aware of the risks arising from the use of the new technology, which are not typically associated with traditional securities. These include risks related to ownership (e.g., how it is transferred and recorded) and technology (e.g., forking, network outages, and cybersecurity).

Linklaters, which advised HGI on the issuance, says the launch of the tokenized fund represents a significant development in the blockchain-based digital investment landscape in Hong Kong and the broader Asia region.

“We are delighted to have supported HGI on this pioneering tokenized fund launch which bolsters Hong Kong’s position as an Asian, and global, crypto hub,” says Chin-Chong Liew, Linklaters’ Asia head of structured finance and derivatives.

The law firm provided advice on Hong Kong legal and regulatory issues concerning the tokenization arrangement as well as the transaction documents for offering the tokenized fund.

Linklaters' Asia team also recently advised on the first tokenized structured notes on a public blockchain in Hong Kong SAR as well as the inaugural tokenized green bond by the Hong Kong SAR government.

It has also advised Euroclear Bank on the establishment and the launch of its new digital securities platform and the inaugural digital securities issuance by the World Bank, as well as the European Investment Bank on the issuance of its first-ever notes in digital form on the ethereum public blockchain.