Tokenization Fund Log In to Hong Kong: Analyzing On-Chain Innovation and the Future of RWA

On February 13, 2025, Huaxia Fund (Hong Kong) announced that its "Hong Kong Dollar Digital Currency Fund" had been approved by the Hong Kong Securities and Futures Commission, becoming the first tokenized fund aimed at retail investors in the Asia-Pacific region, and will officially issue on February 28. This marks an important breakthrough in the tokenization of assets from institutions to the mass market.

Characteristics of Tokenization Funds

Tokenization refers to the conversion of the rights to real-world assets (RWAs) into digital tokens on the blockchain. A tokenized fund is one that "logs in" fund shares as digital tokens, with each token representing a unit or share of the fund. While the essence of investment is similar to traditional funds, tokenized funds are innovative in terms of ownership attribution, information transparency, and trading models:

• Ownership: Real-time rights confirmation through blockchain technology
• Trading Efficiency: 24/7 trading, T+0 settlement
• Transparency: Asset allocation, net worth, and other information is real-time on-chain
• Liquidity: Secondary market trading increases liquidity
• Cost: Reduce intermediary costs

Overview of the "Hong Kong Dollar Digital Currency Fund"

The fund primarily invests in Hong Kong dollar short-term deposits and high-quality money market instruments, offering three share classes in Hong Kong dollars, US dollars, and Renminbi. Its core feature is the use of a custodial tokenization model, with a certain bank serving as the tokenization agent, digital platform operator, and token custodian.

Retail investors can only subscribe for or redeem tokenized shares in token form through qualified distributors. Currently, it is only issued to investors in the Hong Kong region, and investors from other regions cannot participate directly.

Tokenization Fund's Subscription and Redemption Mechanism

Subscription process:

1. Investors subscribe to fund tokens through distributors, using fiat currency for payment.
2. The distributor notifies the fund manager and transfers the subscription amount.
3. The fund manager issues tokenized shares and instructs the digital platform to mint Tokens.
4. The token custodian will keep the tokens in the distributor's wallet.
5. The distributor allocates tokens to investors.

Redemption Process:

1. Investors apply to the distributor to redeem Tokens.
2. Distributor Notifies Fund Manager
3. The fund manager redeems the tokenized shares and instructs the destruction of the corresponding tokens.
4. The fund manager pays the redemption earnings to the distributor.
5. The distributor pays the investors and deducts their custody Token.

Industry Outlook

The launch of this tokenized fund marks the expansion of Web3.0 technology into the retail investment sector. Although the current investment targets are relatively conservative, there may be more funds entering the blockchain tokenization space in the future, offering more diversified investment strategies and products.

With the gradual maturity of the compliant blockchain currency system, asset tokenization, leveraging on-chain transactions and global liquidity advantages, may become an important factor in reshaping the global asset management landscape.