Last week, the Hong Kong government issued $5.75 billion in green bonds in a mix of US dollars, euros, and renminbi. These bonds did not involve blockchain, but the Hong Kong Monetary Authority (HKMA) has confirmed that it will be next.

“The HKMA is working on another government institutional green bond in tokenized format,” an HKMA spokesperson told Ledger Insights. “The aim is to test the financial infrastructure and the legal and regulatory environment in Hong Kong for the use of DLT throughout the life cycle of the bonds and to serve as a guide for future similar issuances by market participants.”

The HKMA has been working with the BIS Innovation Hub on a green bond tokenization project for a couple of years, so the news is not surprising. There were two iterations of the Genesis Project, with the first phase of 2021 emphasizing the use of blockchain for bond issuance with two prototypes, one from Digital Asset, GFT and Allinfra and the other from Standard Chartered, SC Ventures and Shareable Asset.

The Genesis 2.0 Project expanded work to track ecological claims or “mitigation outcome interests” (MOIs) on an ongoing basis. A wind farm bond will generate annual carbon benefits over its ten-year lifespan, and the blockchain is used to tokenize the MOIs, which can be traded separately from the underlying bond.

For the second iteration, a consortium included Goldman Sachs, Digital Asset, and Allinfra. And the other was led by Thailand’s Krungthai Bank, InterOpera and two Korean industrial firms, Sungshin Cement and Samwoo.

While several governments and government-backed organizations have already tokenized bonds, we are not aware of any that have issued blockchain-based green bonds. Examples of blockchain-based government bond issuers include the governments of the Philippines and Thailand, with Korea, Israel, Russia and the UK exploring it. The World Bank and the European Investment Bank (EIB) have already issued multiple blockchain-based bonds.

Meanwhile, the owner of the Tokyo Stock Exchange, JPX, is working on a green bond solution.