Legal development

Singapore promotes broader adoption of digital bonds through Global-Asia Digital Bond Grant Scheme (G-ADBGS)

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    On 15 January 2025, the Monetary Authority of Singapore (MAS) launched the G-ADBGS. The G-ADBGS seeks to catalyse the issuance and broader market adoption of digital bonds in Singapore.

    Introduction

    The MAS launched the G-ADBGS to promote the issuance of digital bonds, which are bonds issued on a digital platform using distributed ledger technology (DLT) that enables the automation of operational, settlement and asset servicing processes.

    This scheme comes in quick succession after the Hong Kong Monetary Authority (HKMA) launched its Digital Bond Grant Scheme (Hong Kong DBGS) on 28 November 2024, as per our earlier publication. This is a testament to the strong confidence in digital bonds shown by the financial regulators of two major Asian financial hubs. Regulators have cited confidence in issuance of bonds on digital platforms using DLT as having the potential to improve operational efficiency and lower costs.

    Noticeably, the G-ADBGS allows digital bonds to be issued on a designated digital asset platform in Singapore without specifying any Singapore based central securities depositary or if the development of such platform is by a Singapore-based provider. The Hong Kong DBGS requires digital bonds to be issued on a DLT platform operated by the Central Moneymarkets Unit (CMU), the debt securities settlement system operated by the HKMA or a DLT platform developed and operated by a digital team with substantial Hong Kong presence. Further, the eligible expenses that Hong Kong DBGS largely covers are the costs of Hong Kong-based intermediaries while the G-ADBGS does not restrict to costs of Singapore-based intermediaries, thereby potentially involving global participants.

    The subsidies provided are in two tiers and quantum is similar across both schemes.

    Comparison of the grant schemes

    The details of the G-ADBGS are as follows and are framed comparatively to the Hong Kong DBGS:

    Grant categories

     Details of the G-ADBGS

    Details of Hong Kong DBGS

    Qualifying issuer

    Companies and non-bank financial institutions with an Asian nexus.

    • No particular sector or background requirement.
    • Issuer including its associates (as defined in the Hong Kong DBGS) may receive subsidies if requirements are met

    Qualifying issuance

    Declares itself to be a Qualifying Debt Security.

    (Conditions under the Qualifying Debt Securities Scheme are set out in the Income Tax Act and Income Tax (Qualifying Debt Securities) Regulations)

    • No such requirement to fall under any other debt regime in Hong Kong
    • However, eligibility of a "digital bond issuance" is determined on a case-by-case basis

    Substantially arranged by licensed entities in Singapore.

    • It is a Basic Requirement (to qualify for the Half Grant (see below) and the Full Grant (see below)) that the digital bond must be issued in Hong Kong, i.e. half or more of the involved lead arranger(s) are recognised arrangers, which in general means having substantial Hong Kong debt capital market operations.

    Issued on a designated digital asset platform in Singapore.

    • It is a Basic Requirement that the digital bonds must be issued on a DLT platform operated by the CMU; or
    • The team involved in the development and/or operations of the DLT platform and other digital aspects of the issuance (“digital team”) must have substantial Hong Kong presence.

    *Note that the Basic Requirements must be met in full to at least qualify for the Half Grant.

    • It is an Additional Requirement (to qualify for the Full Grant) that the DLT platform must be provided by an entity that is not an associate of the issuer.

    *Note that the Basic Requirements and ALL Additional Requirements must be met to qualify for the Full Grant.

    Listed on the Singapore Exchange (SGX) or a designated digital asset platform.

    • Not a Basic Requirement
    • It is an Additional Requirement that the digital bonds must be listed on the Hong Kong Stock Exchange (SEHK), or virtual asset trading platform(s) (VATPs) licensed by the Securities and Futures Commission (SFC).

    Aligned with internationally-recognised digital bond standards.

    No such requirement

    • Minimum issuance size of S$100 million.
    • Where the issuance size is at least S$200 million, the bond must be digitally native.
    • It is an Additional Requirement for the digital bonds to be issued at a minimum size of HK$1 billion (approximately S$175 million equivalent) (all tranches combined, if applicable).
    • No requirement for the bonds to be digitally native regardless of issue size.

    Where the tenure is at least 1 year, the issue must be joint-led by at least 2 specified licensed entities in Singapore.

    • See above Basic Requirement on recognised arrangers.

    Denominated in Asian local or G3 currencies (being USD, EUR and JPY).

    • No specific requirement, but if digital bonds are issued on a DLT platform operated by CMU, note that the currencies supported by CMU include HKD, RMB, USD and EUR.

    No such requirement

    • It is an Additional Requirement for the digital bonds issued, at issuance, to five or more investors that are not associate(s) of the issuer or DLT platform provider(s) of the issuance.

    Eligible expenses

    (a) Arranger fees;

    (b) Audit fees;

    (c) Credit rating fees;

    (d) Legal fees;

    (e) Listing agent fees;

    (f) Listing fees; and

    (g) Platform fees

    (a) Hong Kong-based arranger fees, excluding arrangers that are associates of the issuer;

    (b) Hong Kong-based auditors, accountants and rating agencies fees;

    (c) Hong Kong-based legal advisors fees;

    (d) Listing fees to the SEHK, or VATPs licensed by the SFC;

    (e) CMU lodging and clearing fees; and

    (f) Fees to DLT platform providers, excluding DLT platform providers that are associates of the issuer

    Expenses covered by other grant scheme(s) in Hong Kong or outside Hong Kong will be excluded. See our earlier publication for further details.

    Per-issuance cap

    Quantum of subsidies is capped at two tiers, each similar in amount to the Hong Kong DBGS.

    The two tiers depend on the issue size.

    • Eligible expenses are funded at a level of 30%,
    • At a cap of S$250,000 where the initial principal amount issued is S$100 million (or its equivalent in another currency); or
    • At a cap of S$450,000 where the initial principal amount issued is S$200 million (or its equivalent in another currency) (note the requirement for the bond to be digitally native).

    Quantum of subsidies is capped at two tiers, each similar in amount to the G-ADBGS.

    The two tiers depend on if Additional Requirements are met.

    • Eligible expenses are funded at a level of up to 50%
    • HK$1.25 million (or approximately S$220,000) (Half Grant) if the issuance meets the Basic Requirements; or
    • HK$2.5 million (or approximately S$440,000) (Full Grant) if the issuance meets the Basic Requirements and all Additional Requirements.

     

     

    Other aspects of the schemes

     Details of the G-ADBGS

    Details of Hong Kong DBGS

    Number of grants under the scheme

    Two qualifying digital bond issuances.

    • Each issuer, including its associates (as defined under the Hong Kong DBGS) may receive subsidies under the Hong Kong DBGS for a maximum of two digital bond issuances.

    Validity of the scheme

    valid till 31 December 2029.

    • Initial period of 3 years from 28 November 2024, but applications can be made for bonds issued on or after the Policy Address announcement on 16 October 2024.

    Application process

    Interested parties can write to fsdf@mas.gov.sg for more information.

    • Prior to or after the issuance, the issuer, the lead arranger(s) and/or the DLT platform provider(s) may initiate a pre-application consultation with the HKMA via dbgs@hkma.gov.hk before submitting the formal application.

    Applicants of Global-Asia Digital Bond Grant Scheme should submit their applications no later than 3 months after the issue date.

    • A formal application may be made by the issuer, the lead arranger(s) and/or the DLT platform provider(s) within three months after the bond is issued.
    • Applicants may obtain the DBGS Application Form from the HKMA via dbgs@hkma.gov.hk.

    Learn more

    Ashurst is at the forefront of the bond digitalisation journey in Asia and globally. Our transactional advantage is supported by deep fintech regulatory expertise and we are exceptionally placed to provide legal advice and support to issuers, dealers, digital teams, custodians/agents, platform providers and operators. Our experience in digital bonds and payments includes advising:

    • Project Evergreen 2: on the use of HSBC Orion to the CMU to support the issuance of the world's first multicurrency digital green bonds by the HKSAR government.
    • Project Evergreen: on the use of a tokenisation platform (GS DAP™) in the world's first tokenised green bond issued by a government, under Hong Kong's Government Green Bond Programme.
    • on the provision of HSBC Orion to the CMU in connection with the issuance of HK$1 billion digitally native notes by HSBC as issuer.
    • on the development and launch of Goldman Sachs DAP™, a proprietary multi-asset class digital platform. This involved cross-border coordination with the French and Luxembourg central banks in connection with the issuance of central bank cash tokens through the Target 2 payment system.
    • on Goldman Sachs' response to and participation in a proof of concept project known as Genesis 2.0 in Hong Kong, to create smart contract-based carbon credits attached to green bonds.
    • on the design and launch of digital deposits / tokenised money solutions utilising distributed ledger technology to Tier 1 Global Banks on digital money.

    Our recent awards include the following:

    • Most Innovative Law Firm Headquartered Outside Asia Pacific – FT Innovative Lawyers Awards APAC 2024, 2022 and 2018
    • Goldman Sachs Project Evergreen Debt Market Deal of the Year at Asian Legal Business Hong Kong Law Awards 2023
    • Goldman Sachs Project Evergreen Best Digital Bond Issuance award, DMI 2023
    • Specialist Award: Digital Finance – EIB Digital Bond IFLR Europe Awards 2023
    • Digital Finance Award Global Award at IFLR Europe Awards 2023

    Please contact us to learn more about the grant schemes, digitalisation and more.

    With thanks to Zoe Chan (Trainee) for her contribution to this article.

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    This material is current as at 21 January 2025 but does not take into account any developments to the law after that date. It is not intended to be a comprehensive review of all developments in the law and in practice, or to cover all aspects of those referred to, and does not constitute legal advice. The information provided is general in nature, and does not take into account and is not intended to apply to any specific issues or circumstances. Readers should take independent legal advice. No part of this publication may be reproduced by any process without prior written permission from Ashurst. While we use reasonable skill and care in the preparation of this material, we accept no liability for use of and reliance upon it by any person.

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