♻️Hong Kong Goes Green with 800M HKD in Tokenized Bonds

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Gooood morning, Rainmakers! ☀️

As always, we have two captivating topics for you to dive into:

1️⃣ ♻️Hong Kong Goes Green with 800M HKD in Tokenized Bonds

2️⃣ 📉Terraform's Failed Stablecoin Lands them in Hot Water with SEC

Without further ado, it's time to…

Get liquid💧

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♻️Hong Kong Goes Green with 800M HKD in Tokenized Bonds

Hong Kong has made history by issuing the world's first tokenized green bond! The government of Hong Kong used blockchain technology to raise over $100 million in its digital green bond sale, and major banks like the Bank of China, Credit Agricole, Goldman Sachs, and HSBC were appointed to sell the bonds.

The bond was cleared and settled on a distributed ledger technology-based platform developed by Goldman Sachs. The Central Money Markets Unit of the Hong Kong Monetary Authority stated that the bond's coupon payment, secondary trading settlement, and maturity redemption would be digitalized and performed on a private blockchain network.

The successful issuance of the first tokenized green bond in Hong Kong highlights the city's commitment to sustainable finance and combating climate change. But what exactly are green bonds, and how do they work?

As a core component of the Government Green Bond Programme (GGBP), the Green Bond Framework sets out how the Hong Kong government intends to issue green bonds to fund new financing or re-financing green projects. These projects are consistent with the government's vision to improve the environment, combat climate change, and transition to a low-carbon economy. The framework was first published in March 2019 and updated in February 2022 to reflect Hong Kong's latest climate commitments and strategy, aligning with the latest international standards and practices in the green bond market.

Green bonds allow investors to support environmentally friendly projects while still earning a return on investment. These bonds are similar to traditional bonds, but their proceeds are used to fund projects that positively impact the environment. Examples of eligible categories for green bonds include renewable energy, energy efficiency, pollution prevention and control, and now, "climate change adaptation."

To ensure transparency and accountability, the Hong Kong government obtains a Second Party Opinion from an independent international provider of Environmental, Social, and Governance (ESG) research and services for each green bond issued under the Framework. Additionally, the government obtains an issuance-level external review from an independent, qualified third party for each green bond issuance.

By utilizing blockchain technology to create digital tokens, Hong Kong's government provides more transparency, efficiency, and accessibility in the issuance and trading of securities. And let's face it, who doesn't love a bit of extra transparency, efficiency, and accessibility in their financial transactions?

Financial Secretary Paul Chan noted that the successful issuance of tokenized green bonds marks a milestone for Hong Kong, saying, "Hong Kong has been actively promoting the application of innovative technologies in the financial sector, actively exploring new concepts and technologies to improve the efficiency, transparency, and security of financial transactions."

This move toward the digital settlement of bonds on private blockchain networks marks a significant shift from traditional settlement processes, which often rely on manual verification and paper-based documentation. Plus, it's a big step in promoting the adoption of DLT in the bond market, and the Hong Kong government is encouraging market participants to conduct tokenized issuances in the city.

The successful issuance of the tokenized green bond highlights the growing adoption of blockchain technology in the financial industry and marks an essential step toward the development of sustainable finance globally.

📉Terraform's Failed Stablecoin Lands them in Hot Water with SEC

Terraform Labs PTE Ltd and its founder, Do Hyeong Kwon, are the latest targets of the Securities and Exchange Commission (SEC)'s crypto crackdown. The Singapore-based firm created an algorithmic stablecoin called TerraUSD (UST), which caused crypto contagion worldwide when it failed, leading to innumerable losses. The SEC's complaint alleges that from April 2018 to May 2022, Terraform and Kwon raised billions of dollars by selling an inter-connected suite of crypto asset securities, many in unregistered transactions.

The SEC claims that Terraform and Kwon marketed crypto asset securities to investors by repeatedly claiming that the tokens would increase in value. In addition, they offered and sold investors other means to invest in their crypto empire, including the crypto asset security tokens MIR and LUNA. While marketing the LUNA token, Terraform, and Kwon allegedly misled and deceived investors that a popular Korean mobile payment application used the Terra blockchain to settle transactions that would accrue value to LUNA.

In May 2022, UST lost its USD peg, and its price and sister tokens plummeted close to zero. This past week, the SEC filed a lawsuit against Terraform Labs and its founder, accusing them of committing fraud by repeating false and misleading statements to gain investors' trust before causing significant losses.

The SEC's recent complaint alleges that Terra's failed algorithmic stablecoin TerraUSD, LUNA, and Wrapped LUNA Classic were securities under US securities laws. The SEC's classification of the Terra tokens as securities is based on the Howey Test, a legal framework that determines whether an investment contract qualifies as a security. According to the Howey Test, an investment contract is a security if it involves an investment of money in a common enterprise with an expectation of profits primarily from the efforts of others.

In the case of Terra tokens, the SEC argues that the tokens meet the criteria for an investment contract. Terraform Labs raised billions of dollars from investors by offering and selling Terra tokens and marketing them as a way for investors to earn profits. Investors purchased these tokens with an expectation of appreciation in value, which was primarily dependent on the efforts of Terraform Labs and its founder, Do Hyeong Kwon.

Furthermore, the SEC alleges that Terraform Labs and Kwon made false and misleading statements to investors, creating a false sense of trust, before the tokens' devastating loss in value in May 2022. The SEC argues that Terraform Labs and Kwon violated securities laws by offering and selling unregistered securities to investors and making fraudulent and misleading statements in connection with these sales.

The value of Terra-related tokens, including USTC, LUNC, and LUNA, has taken a hit following the SEC's announcement.

💦 What else is Drippin’

Welcome back to The State of Security Tokens!

This year's edition is all about the most significant moves in the institutional adoption of tokenized assets, and let me tell you, it's MASSIVE. We've got all the heavy hitters you'd expect, like KKR and JPMorgan, but also some exciting new players like AllianceBernstein, Figure & Provenance, and Regulated Liability Network (RLN).

Trust us. You won't want to miss this deep dive into the world of institutional security tokens. So sit back, relax, and get ready to be wowed by all the action in The State of Security Tokens 2023 - Institutional Edition.👇

Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.

Disclosures:

• No money or other consideration is being solicited, and if sent in response, will not be accepted;

• No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and

• A person’s indication of interest includes no obligation or commitment of any kind.

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