Hong Kong could double its fund industry through tokenization, BCG says

A recent report by the Boston Consulting Group (BCG) suggests that the widespread adoption of fund tokenization could be a transformative catalyst for Hong Kong’s asset management industry, potentially doubling the territory’s assets under management (AUM) over the next decade. The findings position tokenization—the process of representing fund shares digitally on a blockchain—as a critical engine for future growth, particularly by unlocking greater efficiency and access in the distribution of financial products.

BCG highlights that current friction points in traditional fund administration, such as high operational costs, lengthy settlement periods, and limited liquidity, are effectively mitigated by blockchain technology. Tokenization allows for fractionalization of high-value assets (like private equity and real estate), making sophisticated funds accessible to a broader base of investors, including retail and small institutional players. This expansion of accessibility, combined with reduced administrative overhead, is projected to dramatically increase AUM inflows.

The report emphasizes that the primary drivers of this growth will be increased cross-border investment and the inclusion of private market assets. Hong Kong, already a major hub for wealth management in Asia, stands to benefit significantly by serving the growing demand for digital assets from high-net-worth individuals in Mainland China and the broader Southeast Asian region.

To capture this massive potential, BCG advises that robust regulatory clarity is essential. Hong Kong’s regulators must establish a comprehensive, legally certain framework specifically for tokenized securities and fund distribution. Furthermore, cooperation between regulators and financial institutions is necessary to build the required digital infrastructure that ensures interoperability between traditional clearing systems and emerging decentralized platforms.

In conclusion, the BCG study views tokenization not simply as a technological enhancement, but as a strategic imperative for Hong Kong to maintain and solidify its status as a global financial centre in the era of digital finance. Failure to rapidly adopt these standards risks ceding ground to competing global hubs.

Source: Hong Kong could double its fund industry through tokenization, BCG says