At a January 15 press conference, Zhang Dayong, chief commercial officer at Hashkey Group, predicted that 2025 will be the year when the crypto native community and traditional financial services converge, including in Asia Pacific (Apac).
The operator of Hashkey Exchange, one of the licensed virtual asset exchanges in Hong Kong, revealed several upcoming trends anticipated by the crypto community, including the potential for Bitcoin’s value to surge beyond $300,000, from around $100,000 at the time of writing, and the Trump administration’s welcoming attitude towards the crypto community.
Also among the trends were an increasing market capitalisation of US dollar-pegged stablecoins, the development of central bank digital currencies (CBDCs) and of real-world asset (RWA) tokenisation. Hashkey’s chief executive officer (CEO) Xiao Feng added that the space will continue to witness more participation from traditional financial institutions moving forward.
An example is the Project Ensemble sandbox, led and launched by the Hong Kong Monetary Authority (HKMA) last August, which involves traditional banks and fintech firms, including Bank of China (Hong Kong), HSBC, Standard Chartered and Ant Digital Technologies.
The project is set to explore tokenisation use cases across themes including fixed income and investment funds; liquidity management; sustainable finance; and trade and supply chain finance. There are expected to be updates on progress later this year.
To gauge how different communities are coming and working together to deploy blockchain technology and what 2025 will mean for this space, FinanceAsia spoke to several market players.
Tokenisation convergence
The idea of tokenisation is not new, said Michael Lau, group head of business development at Bullish and chairman of Consensus Hong Kong, a crypto conference which is taking place in February, as it expands into Asia.
RWAs such as real estate investments have been discussed as a promising field of tokenisation, which then brings fractionalised investment opportunities and, arguably, ‘democratises’ financial investments. Due to the risky nature of real estate assets and their illiquid nature, the idea has gained limited traction.
Lau added that when talking about tokenisation, there needs to be solid use cases. The tokenisation of money market funds (MMFs), in his view, is one of the examples.
“Most of the history of the digital asset industry was in a zero-interest rate environment. And when we came out of that environment [when central banks raised rates], a key problem for the digitally native community to solve is the fact that stablecoins do not accrue any interest,” he said.
Tokenised MMFs, which are liquid and interest-bearing, could therefore provide a solution to the digital asset community. Bringing such facilities on-chain means the ability to invest in tokens using cryptocurrencies, as seen in Franklin Templeton’s MMF launched on public chain Avalanche.
For the traditional finance community, the promise of tokenisation lies in blockchain technology’s ability to drive operational efficiency.
“The transparency afforded by distributed ledger technology (DLT) ensures an immutable and secure framework, further increasing trust among stakeholders,” added Justin Christopher, managing director, head of Asia at Calastone.
He pointed out that MMFs are well-understood cash products with simpler settlement cycles, which in turn benefits from stronger regulatory support, a prerequisite for traditional financial institutions to venture into new techs.
Tokenised MMFs’ ability to serve as collateral also holds strong financial implications for an at-scale on-chain finance space.
Regulation
Executives at Hashkey Group emphasised that regulation and compliance are not hurdles, but fundamentals, for the digital asset industry to develop.
The group’s Hashkey Exchange is one of the earliest crypto exchanges to receive a virtual asset trading platform (VATP) to be licensed by the Securities and Futures Commission (SFC) in Hong Kong, a scheme introduced last June. Seven exchange platforms have obtained a license so far.
The HKMA launched in July a stablecoin issuer sandbox, shortly after receiving consultation results of a stablecoin issuer licensing regime to be rolled out this year. Crypto native players such as RD InnoTech and Amonica Brands are part of the initiative, alongside traditional institutions such as Standard Chartered.
Ross Edwards, senior director, global financial institutions, at Ripple, said that digital cash forms such as stablecoins are critical for realising the full benefits of tokenisation.
“While on-chain tracking of asset lifecycles improves transparency and trust, the inclusion of tokenised cash movements extends these benefits end-to-end,” he told FA.
Compressing price discovery, matching, clearing, and settlement are some other potential beneficial outcomes of tokenised forms of cash. “By streamlining these processes, markets can operate more fluidly with reduced transaction costs — ultimately increasing liquidity and increasing market participation,” he said.
In Singapore, the Monetary Authority of Singapore (MAS) leads Project Guardian, which encompasses 20 industry pilots across tokenisation adoption in asset management, fixed income and the foreign exchange space, involving a more diverse list of traditional institutions, as well as crypto native organisations.
Northern Trust, UOB and the National University of Singapore recently announced their successful exploration in bringing reporting credentials of green bonds on-chain, keeping disclosure information as reporting tokens.
Despite Singapore and Hong Kong being regional leaders across Apac, the region still faces the issue of fragmentation when it comes to the digital asset regulatory landscape. This hinders the development of cross-border investments and brings additional compliance challenges, according to Calastone’s Christopher.
Technologically, interoperability issues across various digital asset platforms, as well as investors and regulators’ understanding of the space, remain to be addressed.
Ripple’s Edwards said that there is a growing demand from enterprise customers for secure and well-regulated digital asset infrastructure, and safe digital asset custody will become an “essential” component of digital asset banking services.
“As a growing number of global jurisdictions work to bring regulatory clarity to crypto, we’ll see more players move from experimenting with pilot services to building enterprise products for traditional firms such as banks,” he said.
