How Can Hong Kong Take the Lead in the Tokenization Wave?｜#02 | by OKG Research | The Capital | Feb, 2025

By Lola Wang & Jason Jiang, OKG Research

U.S. President Donald Trump recently announced the launch of his personal meme coin, $Trump, on social media, once again drawing global investors’ attention to the crypto market. After he returns to the White House, Trump could usher in a new era of U.S. crypto regulation, encouraging more institutions to embrace the wave of crypto innovation. Coinbase Head of U.S. Policy, Kara Calvert, recently stated, “Trump is signaling that America is back. We are ready to lead this industry. For other countries, this means: be careful, or you’ll be left behind.”

Tokenization is transitioning from concept to reality, hailed by Boston Consulting Group (BCG) as the “third revolution in asset management”, with explosive growth expected in the next five years. OKG Research predicts that non-stablecoin tokenized assets will surpass $30 billion by 2025.

As a global financial hub, Hong Kong is actively embracing the tokenization wave. The 2024 Policy Address outlined initiatives to promote RWA tokenization and digital currency ecosystem development, while the Hong Kong Monetary Authority (HKMA) introduced a Digital Bond Grant Scheme to incentivize capital markets to adopt tokenization technology. These efforts signal Hong Kong’s ambition to reshape its financial competitiveness through tokenization and gain a strategic edge in future global finance.

However, the primary driver of global tokenization remains the U.S., where Wall Street institutions are pioneering the integration of traditional finance with blockchain. The approval of Bitcoin spot ETFs has funneled institutional capital on-chain, while tokenization accelerates the migration of financial assets and operations onto blockchain networks. Major players like BlackRock, Goldman Sachs, and JPMorgan are leading this tokenization wave, with global repercussions.BlackRock’s BUIDL tokenized U.S. Treasury funds have already surpassed $630 million. JPMorgan’s Onyx platform is spearheading tokenization for U.S. Treasuries and money market funds.

In contrast, Hong Kong has yet to produce a globally influential tokenization initiative. While regulatory support is strong, traditional financial institutions remain cautious, largely in a wait-and-see mode. This hesitancy, driven by compliance concerns, limits Hong Kong’s ability to fully leverage its financial resources for tokenization innovation.

Regulation should facilitate innovation, not hinder it. Institutional participation is crucial for tokenization’s early growth. Coinbase’s proposed stock tokenization plan, though still in its conceptual stage, could rapidly scale and even create an “on-chain Nasdaq”, significantly expanding the tokenized asset market. This underscores the necessity of active institutional involvement to accelerate adoption.

Given the current market structure, Hong Kong should implement a more open tokenization sandbox to attract traditional institutions and encourage innovative pilot projects. To avoid fragmentation, Hong Kong could integrate stablecoin and DLT initiatives into a unified sandbox, allowing institutions to freely explore tokenization applications — from funds and equities to other asset classes.

By fostering an experimental environment, institutions can gradually build expertise and confidence, leading to broader adoption. Without active institutional participation, Hong Kong risks falling behind as the U.S. rapidly advances tokenization initiatives.

Beyond fostering market innovation, Hong Kong must refine its strategic focus for asset tokenization. Globally, tokenization efforts primarily target standardized financial assets, yet Hong Kong’s current focus leans towards non-financial assets like renewable energy and agricultural commodities. While valuable for long-term ecosystem growth, these assets lack short-term market advantages.

As OKG Research has previously pointed out, different asset classes will undergo tokenization at different paces. Bonds and funds, which offer stable returns and large market sizes, are the most suitable candidates for tokenization at this stage. The experience gained from these standardized assets will lay the groundwork for the tokenization of smaller, less liquid, or technically complex asset classes.

To scale its RWA market, Hong Kong should prioritize the tokenization of standardized financial assets like bonds and funds, and leverage its strengths as a global financial, trade, and shipping hub, focus on trade and cross-border tokenization use cases to rapidly expand market size.

While technology alone does not determine tokenization success, an open technological framework is essential for fostering innovation. Some institutions have opted for private blockchains due to regulatory concerns, but major financial and tech firms are increasingly embracing public blockchains.

Over 60% of tokenized bonds and funds are now issued on public blockchains, which offer superior global liquidity and accessibility. Enhanced transparency and on-chain analytics improve asset tracking and compliance. Most tokenized assets are still custodied off-chain, meaning real risk resides off-chain, while blockchains primarily ensure regulatory compliance. Given these factors, Hong Kong should actively explore public blockchain-based tokenization as a core innovation strategy, ensuring compliance while embracing the benefits of an open, permissionless ecosystem.

RWA tokenization represents the convergence of two distinct financial systems. The ideal scenario is not only to accelerate the migration of real-world assets onto the blockchain but also to ensure that their value is not confined solely on-chain; ultimately, these assets must serve and integrate with the real economy.

As Wall Street institutions actively advance tokenization, the window of opportunity for Hong Kong is narrowing. If Hong Kong can leverage its regulatory and market advantages to embrace innovation — while providing traditional financial institutions with greater flexibility to experiment and striking a balance between innovation and regulatory compliance — it will gain a significant competitive edge in the tokenization space. Furthermore, by capitalizing on the trillions of yuan in assets available from Mainland China, Hong Kong is well-positioned to establish a dominant role in this sector with immense growth potential. According to estimates by Boston Consulting Group, Hong Kong’s potential tokenized asset market could reach HKD 36 trillion.

The time to act is now. We look forward to seeing Hong Kong accelerate its progress in RWA tokenization by 2025.