The global boom in tokenized finance is revealing a critical flaw: while assets like bonds and securities are being digitized, the actual money used in these transactions remains stuck in legacy banking systems. For example, a tokenized bond may settle on a blockchain in seconds, but the payment still takes days to process through traditional banking rails. This mismatch means the tokenization engine is only half-built, with regulated, local-currency settlement instruments still needed to complete the system.
The countries that develop these instruments first will gain a decisive advantage, as infrastructure decisions become more costly to implement over time. Currently, dollar stablecoins dominate the market, making up 99.5 percent of the global stablecoin float. However, using a dollar token to pay for a yen-denominated fund or an HKD bond introduces unnecessary currency risk. Asia is leading the way in addressing this issue, with Hong Kong, Japan, and Korea making significant strides in tokenized finance.
Hong Kong has issued over $2 billion in tokenized green and infrastructure bonds and now hosts 13 publicly offered tokenized products worth roughly $1.4 billion, a seven-fold increase in a year. Japan's securities clearing house is trialing blockchain-based collateral, and Korea aims for a fully tokenized securities market by early 2027. The missing piece in Asia is a regulated token denominated in local currencies like the Hong Kong dollar, yen, or won, which can settle transactions on the same blockchain as the assets.
Hong Kong's Stablecoins Ordinance, in effect since August 2025, sets high standards for stablecoin issuers, including a minimum capital requirement of HK $25 million and fully backed reserves with high-quality liquid assets. Only two institutions, HSBC and Anchorpoint, have been granted licenses out of 36 applicants. This selective approach is designed to build trust and encourage adoption among risk-averse institutions. The decisions made now will shape the future of tokenized finance, with local-currency tokens needing to be integrated widely, even before demand exists.