The maximum subsidy is HK$2.5 million! What are the application requirements for the Hong Kong Monetary Authority’s “Digital Bond Subsidy Scheme DBGS”?

The Hong Kong Monetary Authority (HKMA) issued an announcement on November 28, stating that the HKMA is formally launching the "Digital Bond Grant Scheme (DBGS)" to promote the development of the digital securities market and encourage the broader use of tokenization technology in the capital market. According to the HKMA press release, the DBGS has been open for applications since November 28, with an initial duration of three years. If the relevant eligibility requirements of the DBGS are met, each digital bond issued in Hong Kong can receive a maximum grant of HK$2.5 million.

Detailed Information on the Hong Kong Digital Bond Grant Scheme

1. Grant Amount

• If the basic requirements are met, a grant of HK$1.25 million (50% grant) can be obtained.
• If the basic requirements and all additional requirements are met, a grant of HK$2.5 million (100% grant) can be obtained.
• Each issuer, including its affiliates, can receive a maximum of two grants under the DBGS.

2. Basic Requirements

• The digital bond must be issued in Hong Kong, with at least half or more of the lead underwriters being recognized.
• The issuing team must either have a physical presence in Hong Kong or the digital bond issuance must be on a distributed ledger technology (DLT) platform operated by the Central Moneymarkets Unit (CMU).

3. Additional Requirements

• The digital bond must be issued on a DLT platform provided by a non-issuer affiliate.
• The issuance size must be at least HK$1 billion (can be combined in multiple tranches).
• At the time of issuance, the bond must be distributed to investors who are not the issuer or the digital bond issuance platform provider's affiliates.
• The digital bond must be listed on either the Stock Exchange of Hong Kong (SEHK), the Securities and Futures Commission (SFC), or a licensed virtual asset trading platform (VATPs).

4. Eligible Expenses Eligible for Reimbursement

• Fees paid to the DLT platform provider, excluding those paid to the issuer's affiliates.
• Fees paid to local Hong Kong underwriters, excluding those paid to the issuer's affiliated underwriters.
• Fees paid to local Hong Kong legal advisors.
• Fees paid to local Hong Kong auditors, accountants, and rating agencies.
• Listing fees paid to the SEHK, SFC, and licensed VATPs.
• Lodging and settlement fees paid to the CMU.

Finally, if the issued digital bond is also a green bond, social bond, sustainability bond, sustainability-linked bond, or transition bond, and meets the relevant grant scheme's eligibility requirements, the following additional benefits can be obtained:

• Eligible ordinary bond issuance expenses can be reimbursed through the DBGS or the Green and Sustainable Finance Grant Scheme's (GSF) Track I project, up to a maximum of HK$2.5 million, but not both.
• External sustainability review fees can be reimbursed through the GSF's Track II project, up to a maximum of HK$800,000, covering all pre-issuance and post-issuance external review fees.