Hong Kong's Year of Tokenization! Franklin Launches First to Capture the $19 Trillion Blue Ocean Market

Franklin Templeton has launched Hong Kong’s first tokenized money market fund, aligning with the Hong Kong government’s new five-year FinTech strategy aimed at integrating artificial intelligence and blockchain technology into the financial sector. The Franklin OnChain U.S. Government Money Fund, registered in Luxembourg and backed by short-term U.S. Treasury securities, issues blockchain-based tokens representing investor shares and records ownership digitally.

Hong Kong’s FinTech 2030 Plan Achieves Major Milestone

(Source: Franklin Templeton Digital Asset)

This launch marks the first initiative under Hong Kong Monetary Authority’s “FinTech 2030” plan, announced this week by Chief Executive John Lee. The five-year plan is a milestone for Hong Kong’s tokenized fund industry, signaling not just policy support but also concrete action. It outlines over 40 measures to integrate AI tools, build a tokenization ecosystem, and enhance industry resilience.

One core goal of the “FinTech 2030” plan is to establish a comprehensive tokenization ecosystem. According to the South China Morning Post, Lee stated that the HKMA is developing a tokenized deposit settlement framework, which may incorporate central bank digital currency (CBDC) for interbank payments in the future. This indicates Hong Kong’s efforts not only to promote private sector tokenization innovation but also to plan government-level digital currency infrastructure, creating a complete digital financial ecosystem.

The plan expands on ongoing experiments linking tokenized deposits, money market funds, and potential CBDC settlement. This multi-layered integration demonstrates Hong Kong’s vision: to build an interconnected digital financial system where tokenized funds, deposits, and CBDC can seamlessly interact, enabling near-instant settlement and higher capital efficiency.

Timing-wise, Franklin Templeton’s decision to launch Hong Kong’s first tokenized fund coincides with the announcement of the “FinTech 2030” plan, reflecting a carefully coordinated public-private partnership. The government provides policy frameworks and regulatory sandboxes, while businesses contribute technological implementation and market validation. This collaboration is key to successful financial innovation. The rapid startup of Hong Kong’s tokenized fund industry owes much to this efficient coordination.

Deep Dive into Franklin OnChain Fund’s Technical Architecture

The Franklin OnChain U.S. Government Money Fund, registered in Luxembourg and backed by short-term U.S. Treasury securities, issues blockchain-based tokens representing investor shares and digitally records ownership. This structure embodies the core advantage of tokenized funds: digitizing ownership of traditional financial assets for circulation and trading on blockchain.

Compared to traditional money market funds, tokenized versions offer multiple benefits. First, real-time settlement—traditional subscriptions and redemptions typically settle in T+1 or T+2 days, while tokenized funds can settle within minutes. Second, 24/7 trading capability, unrestricted by market hours. Third, programmability—smart contracts can automate dividends, reinvestments, and other operations, reducing operational costs. Fourth, enhanced transparency—transaction records are publicly accessible on the blockchain.

Choosing short-term U.S. Treasuries as the underlying assets is a prudent, strategic decision. These securities are among the safest globally, highly liquid, and low-volatility, making them ideal for a tokenization pilot. This conservative asset selection reduces investor concerns about underlying asset price fluctuations, allowing focus on the benefits of tokenization technology.

From a regulatory perspective, registering in Luxembourg is a savvy move. Luxembourg is one of the world’s largest fund centers, with a mature regulatory framework and international recognition. Registering there enables Franklin’s OnChain fund to leverage the EU passport mechanism, allowing future sales across the EU, while also providing flexibility to enter Asian markets (starting with Hong Kong).

Project Ensemble Sandbox Validates Cross-Organization Collaboration

Franklin Templeton is collaborating with HSBC and OSL Group, one of Hong Kong’s 11 licensed virtual asset platforms, to test tokenized deposits and fund flows through HKMA’s “Project Ensemble” sandbox. HSBC executives have indicated that this solution could support near-instant settlement between traditional systems and blockchain networks.

Project Ensemble is HKMA’s regulatory sandbox designed to test tokenized financial products and services. It allows participating institutions to experiment under controlled conditions without immediately complying with all regulatory requirements. Such flexible regulation has proven effective worldwide in fostering fintech innovation.

Participants in this collaboration are highly representative: Franklin Templeton as a traditional asset manager, HSBC as a traditional bank, and OSL as a virtual asset platform. Their partnership symbolizes the convergence of traditional and digital finance—an ideal model for Hong Kong’s tokenized fund ecosystem development.

Three Key Scenarios Tested in Project Ensemble

• Interoperability between tokenized deposits and funds: Testing how investors can use tokenized deposits to directly purchase tokenized funds, enabling seamless fund flow across different tokenized products.

• Cross-platform settlement efficiency: Verifying the speed and cost of settlements among traditional banking systems, virtual asset platforms, and blockchain networks.

• Automated execution via smart contracts: Testing the reliability of functions like automatic dividends, reinvestments, and compliance checks.

HSBC emphasizes that near-instant settlement is a core value proposition of tokenized finance. In traditional finance, cross-institution fund transfers can take hours or days, reducing capital efficiency and increasing settlement risk. Blockchain-based tokenization and smart contracts can cut settlement times to minutes, significantly boosting overall system efficiency.

$19 Trillion Market Outlook and Global Competition

More asset management firms are adopting tokenization to improve efficiency and transparency. A report by Ripple and Boston Consulting Group (BCG) in April predicts that the value of tokenized real-world assets will grow from approximately $36 billion today to $19 trillion by 2033. This represents over 500-fold growth over the next decade, making it one of the most exciting growth opportunities in fintech.

This $19 trillion forecast is based on multiple factors: technological maturity—blockchain infrastructure, smart contract platforms, and digital wallets have reached enterprise standards; evolving regulation—many financial hubs like Hong Kong, Singapore, Switzerland, and the UAE are establishing frameworks for tokenized assets; and increasing institutional demand—traditional firms recognize that tokenization can reduce costs, boost efficiency, and open new markets.

In terms of asset classes, tokenization will extend far beyond current money market funds. The report predicts that real estate, private equity, bonds, commodities, art, and intellectual property will all be tokenized, unlocking new liquidity and investment opportunities. For example, real estate tokenization can enable small investors to participate in high-end property investments, while private equity tokens can diversify startup funding channels.

Globally, Hong Kong’s tokenized fund industry faces fierce competition. Singapore’s MAS has launched Project Guardian to test asset tokenization and DeFi applications. Switzerland’s FINMA provides clear regulation for tokenized securities. The UAE’s Virtual Assets Regulatory Authority (VARA) is attracting crypto firms to Dubai. To stand out, Hong Kong must leverage its unique strengths: close ties with Mainland China, mature financial infrastructure, and a flexible regulatory environment under “One Country, Two Systems.”

Hong Kong’s Tokenized Fund Development Advantages

• Strong policy support: The FinTech 2030 plan offers clear roadmaps and resource commitments.

• Financial hub concentration: Over 70 of the world’s top 100 banks operate in Hong Kong.

• Bridge to China and the world: Unique position connecting Mainland China with international markets.

Franklin Templeton’s launch of Hong Kong’s first tokenized fund marks the official start of the city’s tokenized fund era.