Key Takeaways
- • Hong Kong's Securities and Futures Commission has approved Baillie Gifford's Enhanced Yield Fund (BAGEY), marking the first "digitally native" tokenised fund in the jurisdiction, where tokens represent direct legal ownership on public blockchains rather than mirrored digital twins.
- • BAGEY is an actively managed portfolio of short-duration government and corporate bonds denominated in US dollars, operating on both Ethereum and Solana blockchains, available to professional investors.
- • The approval represents Hong Kong's competitive response to rapid US tokenised fund growth, where BlackRock filed for Ethereum-based tokenised money market funds in May 2026, and Franklin Templeton's digitally native Benji fund is already accessible to Hong Kong professional investors.
- • Unlike most tokenised funds that use traditional ownership records mirrored on blockchains, digitally native structures grant token holders full legal rights to underlying assets with the public blockchain serving as the official ownership registry.
- • The SFC's November 2023 circular on tokenisation did not prohibit such products, creating regulatory clarity that enabled this approval as Hong Kong positions itself as a competing global crypto hub.
Summary
Hong Kong has approved its first "digitally native" tokenised fund, advancing the city's strategy to compete with the United States as a global cryptocurrency hub. The Securities and Futures Commission cleared Baillie Gifford's Enhanced Yield Fund (BAGEY) for launch, representing a structural innovation in how tokenised assets function in regulated markets.
The distinction between BAGEY and existing tokenised fund models is material for institutional investors. Most tokenised funds currently employ a "digital twin" architecture—recording legal ownership in traditional ledgers while mirroring corresponding holdings on a blockchain. Token holders in these structures do not possess direct exposure to underlying assets. By contrast, BAGEY operates as a "digitally native" fund, using the public blockchain as the official ownership record. This grants token holders direct legal rights to the fund's underlying assets, eliminating the intermediation layer present in twin-model structures.
BAGEY itself is an actively managed portfolio of short-duration government and corporate bonds, denominated in US dollars. The fund will operate on both Ethereum and Solana blockchains, providing professional investors with cross-chain settlement optionality. The SFC did not immediately comment on the approval, though the regulator's November 2023 tokenisation circular explicitly did not prohibit such issuance structures.
The approval occurs amid intensifying transatlantic competition in tokenised asset offerings. BlackRock filed for two tokenised money market funds on the Ethereum blockchain in May 2026, signalling institutional-grade adoption of blockchain-native structures. Franklin Templeton's Benji, a digitally native token representing its Franklin OnChain US Government Money Fund, has already been made available to professional investors in Hong Kong. These developments underscore how both US and Hong Kong regulators are progressively accommodating blockchain-based fund structures that grant direct asset ownership to token holders, reshaping the competitive landscape for global asset managers.
The distinction between BAGEY and existing tokenised fund models is material for institutional investors. Most tokenised funds currently employ a "digital twin" architecture—recording legal ownership in traditional ledgers while mirroring corresponding holdings on a blockchain. Token holders in these structures do not possess direct exposure to underlying assets. By contrast, BAGEY operates as a "digitally native" fund, using the public blockchain as the official ownership record. This grants token holders direct legal rights to the fund's underlying assets, eliminating the intermediation layer present in twin-model structures.
BAGEY itself is an actively managed portfolio of short-duration government and corporate bonds, denominated in US dollars. The fund will operate on both Ethereum and Solana blockchains, providing professional investors with cross-chain settlement optionality. The SFC did not immediately comment on the approval, though the regulator's November 2023 tokenisation circular explicitly did not prohibit such issuance structures.
The approval occurs amid intensifying transatlantic competition in tokenised asset offerings. BlackRock filed for two tokenised money market funds on the Ethereum blockchain in May 2026, signalling institutional-grade adoption of blockchain-native structures. Franklin Templeton's Benji, a digitally native token representing its Franklin OnChain US Government Money Fund, has already been made available to professional investors in Hong Kong. These developments underscore how both US and Hong Kong regulators are progressively accommodating blockchain-based fund structures that grant direct asset ownership to token holders, reshaping the competitive landscape for global asset managers.
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