Hong Kong has given regulatory green light to its first “digitally native” tokenised fund, enabling professional investors to hold asset ownership directly on public blockchains and strengthening the city’s position in the global crypto market.
- First approval of a ‘digitally native’ tokenised fund in Hong Kong
- Fund ownership recorded directly on Ethereum and Solana blockchains
- Part of Hong Kong’s broader drive to establish a premier crypto finance hub
What happened
Hong Kong’s Securities and Futures Commission (SFC) approved the Baillie Gifford Enhanced Yield Fund (BAGEY), marking the city’s first regulatory endorsement for a digitally native tokenised fund. This innovative fund allows qualified investors to own portfolios of short-duration government and corporate bonds directly through blockchain tokens, providing a more efficient, transparent, and accessible investment vehicle.
Unlike most tokenised funds that maintain ownership records off-chain with blockchain simply mirroring legal ownership, BAGEY uses public blockchains such as Ethereum and Solana as the master record of ownership. This grants token holders full legal rights over the underlying assets, a significant evolution in fund structuring that could set new standards for digital asset offerings.
Why it matters
This regulatory milestone fits within Hong Kong’s broader strategy to enhance its digital asset ecosystem, which includes formalizing licensing regimes and fostering market infrastructure. Despite ongoing market volatility and declining crypto prices affecting investor sentiment, the regulatory environment continues to encourage product development, secondary trading, and blockchain-driven debt issuances.
What to watch next
Market participants and regulators will be closely monitoring the uptake and performance of the BAGEY fund as a measure of investor confidence in blockchain-native investment structures. The fund’s ability to offer fractional ownership and 24/7 settlement may prompt other issuers in Hong Kong and beyond to pursue similar tokenised fund launches.
Meanwhile, ongoing regulatory efforts—such as the Hong Kong Monetary Authority’s initiatives to address legal bottlenecks for tokenised bonds—will be critical to expanding the ecosystem. Observers should watch how Hong Kong balances innovation with investor protection and how this impacts its rivalry with US crypto centers as blockchain adoption grows across traditional finance.