Experts predict that tokenization and a possible shift to central bank digital currencies (CBDCs) could help Hong Kong's GDP rise greatly in the upcoming years.

The forecasts follow the conclusion of an e-HKD trial on tokenized real-world assets, which involved Boston Consulting Group (BCG), Hong Kong Telecom, and ZA Bank. Examining the viability of tokenizing real estate and other assets, the study showed promise for enhancing the Special Administrative Region's (SAR) digital economy.

BCG predicted in its submission that the region's GDP would significantly increase as a result of the integration of digital assets. To arrive at the hypothesis, BCG took into account tokenized deposits, tokenization of real-world assets, stablecoins, and incoming e-HKD.

BCG repeats previous organisations' estimates, estimating the increase will add HK$160 billion (US$20.5 billion) to Hong Kong's GDP by 2032. The predicted 0.5% growth is not guaranteed, as per BCG's note, as a number of issues, including the lack of infrastructure required to support tokenization in the near future, could obstruct its estimates.

BCG notes that in addition to infrastructure, Hong Kong's authorities will need to provide strong regulatory backing for tokenization initiatives and digital currencies.

The BCG analysis makes the assumption that a number of factors, starting with the release of asset liquidity, will inevitably spur the expansion of the local economy. Up to $29 trillion in assets might be made available through tokenization, especially in real estate.

Money distribution, comprehensive support for Web3 efforts, and an investigation into cross-border transactions as a catalyst for economic growth are other possible growth areas.

After finishing the first stage of the e-HKD pilot, Hong Kong is proceeding with its preparations for the CBDC. At present, the central bank is getting ready for the next round of research, which will concentrate on programmability, atomic settlement, and tokenization.

While Project Ensemble has brought CBDCs to a new level, Hong Kong has achieved success with tokenized deposits and stablecoins through strong rulemaking and creative experimentation.

Hong Kong’s attempt at tokenizing real estate

BCG’s pilot involved using blockchain technology to tokenize real estate and hypothetical e-HKD for settlements. Participants were expected to fulfill certain conditions using programmability features before spending the e-HKD with transactions conducted both on-chain and off-chain.

Tokenization and settlements relied on Polygon’s publicly distributed ledger, while credit assessments were conducted off-chain.

BCG, however, stated that a number of problems might hinder the tokenization of physical assets. The pilot identified numerous legal concerns, such as the requirement that the token be a bearer instrument in accordance with current laws and the difficulty of registering each transaction with the off-chain land registry.