Japan is advancing custody rules, Hong Kong is standardizing digitally native bond issuance, and Singapore has approved the first retail tokenized fund.
The sequence is rules, issuance, and cash-like instruments. The link to crypto is not narrative but plumbing that reduces friction for collateral and settlement near BTC and ETH venues.
Japan’s Financial Services Agency set out a pathway that brings crypto closer to Financial Instruments and Exchange Act treatment while reaffirming hardware-segregated custody as the baseline.
The agency’s English discussion paper cites more than 12 million exchange accounts and user assets exceeding ¥5 trillion held by exchanges as of January 2025, with cold wallets serving as the primary means of segregation.
It also outlines information disclosure via exchanges for non-fundraising tokens, flags growth in decentralized exchanges and non-custodial wallets, and points to future alignment on insider-trading and market rules.
According to the FSA paper, a 2025 bill to amend the Payment Services Act, including asset-location requirements and a new intermediary business category, has been submitted to the Diet.
This approach reduces legal and operational uncertainty for banks and broker-dealers that have treated custody and liability as gating risks.
If disclosures are channeled through exchanges for Type 2 tokens and conduct rules converge with the FIEA lens, distribution can expand without the need for bespoke frameworks per asset class.
The practical outlet is broader menus on regulated platforms where BTC and ETH sit within a known disclosure and custody perimeter.
Balance sheet shift sets the demand backdrop
Japan’s household balance sheet, roughly ¥2,200 trillion in financial assets, adds latent firepower as the Bank of Japan anticipates portfolio shifts from deposits to investments as rates normalize.
According to Reuters, the BOJ expects rising inflation to drive demand for new financial services, which could align with exchange distribution once the rules are settled.
Hong Kong, in parallel, has moved from pilots to programmatic issuance of digitally native bonds.
The HKSAR Government’s multi-currency HK$6 billion green bond in 2024 was issued by HSBC Orion with settlement at T+1, compared to T+5 in conventional flows, and maintained compatibility with CMU and Euroclear-style infrastructure.
According to the Hong Kong Monetary Authority, the Digital Bond Grant Scheme offsets origination and platform costs with grants up to HK$2.5 million per qualifying issuance, which lowers issuer hurdles and encourages repeat use of digital rails.
Law firm notes from Linklaters and Ashurst document the first-of-its-kind corporate digitally native notes listed on the HKEX and Bank of Communications’ digitally native bonds in late 2024 and January 2025, expanding beyond sovereign issuance.
The through-line is that DLT wallets and connectivity have moved into production finance.
When settlement compresses from T+5 to T+1 and cash handling syncs with central market utilities, treasurers and funds keep wallets live for working balances and collateral.
That adjacency matters for BTC and ETH because the same operational stack can support tokenized cash and credit lines that sit one hop away from crypto venues for hedging or treasury purposes.
Securities Finance Times’ case material on Orion highlights the counterparty and margin savings that come from time compression, which is a direct cost argument rather than a branding exercise.
Policy scaffolding around settlement assets is also widening.
Hong Kong passed a stablecoin licensing bill in May 2025, creating a path for regulated issuers and a sandbox for rollouts.
According to Reuters, the bill moves the jurisdiction closer to compliant settlement tokens that could sit alongside digitally native notes.
If HKD or USD fully reserved stablecoins operate on the same rails that link to CMU, portfolio managers gain a clean route to park and mobilize balances.
Those balances can also be held in crypto liquidity hubs without requiring excess reconciliation.
Singapore added the consumer-grade piece: retail tokenized cash.
The Monetary Authority of Singapore approved the Franklin OnChain U.S. Dollar Short-Term Money Market Fund for retail sale on May 15, 2025.
Franklin’s transfer-agency stack issues tokenized shares in a VCC structure, and distribution can flow through local channels with standard investor protections.
According to The Business Times, Singapore’s asset management industry reached S$6.07 trillion in 2024, a 12.2% increase year-over-year, providing a substantial domestic base for tokenized funds.
Reuters reports that DBS, Franklin Templeton, and Ripple subsequently teamed up to list sgBENJI on DBS Digital Exchange in September 2025, with stated plans to use tokens as collateral and to execute swaps versus Ripple’s RLUSD stablecoin.
How new tokenized rails translate into crypto-market liquidity
This set of rails affects crypto through liquidity adjacencies rather than direct allocation mandates.
If exchanges and prime brokers accept tokenized money market fund shares as collateral, users can toggle between cash-like tokens and BTC or ETH within a single operational perimeter.
That compresses the basis, deepens the spot and derivatives depth, and reduces the need to move fiat off the platform.
In Japan, exchange-held user assets exceeding ¥5 trillion represent existing custody that can be reweighted toward BTC and ETH once disclosure and market conduct rules are finalized.
In Hong Kong, recurring digitally native bond issuance with T+1 settlement keeps institutional wallets active, making it easier to scale tokenized cash pools that can interact with crypto markets.
In Singapore, retail-grade tokenized cash provides a base layer that can face banks and trading venues, moving beyond pilot-only gating.
Plausibility ranges help quantify the runway over the next 12 to 24 months.
If only 0.5% of Japan’s exchange-held assets are converted into BTC and ETH under more explicit rules, roughly ¥25 billion, or about US$165 million, would be added to spot demand.
If new NISA-related flows bring another 1% to crypto allocations, that could add US$100 million to US$200 million, placing a base case between US$250 million and US$400 million.
A cleaner legal landing that enables ETF-like wrappers could drive flows into the low single-digit billions of dollars over the next two years, consistent with the BOJ’s commentary on portfolio diversification.
Regulatory timing and issuance momentum as swing factors
If enforcement tightens around market integrity before new wrappers arrive, the impact could be flat to modestly positive.
In Hong Kong, another HKSAR batch in the HK$5 billion to HK$10 billion range, plus two to four corporate digitally native notes at HK$1 billion to HK$3 billion each, would keep institutional wallets alive.
If 1–2% of participating balances bridge into tokenized cash on the same rails, US$100 million to US$300 million could sit on-chain adjacent to crypto venues.
A stronger outcome, aided by the Digital Bond Grant Scheme and stablecoin licensing, could propel total digital bond volume above HK$20 billion within a year and increase on-chain cash above US$500 million.
If issuance momentum fades into proofs of concept, on-chain cash could remain below US$100 million with limited spillover.
In Singapore, if 0.1% of S$6.07 trillion in AUM is allocated to tokenized cash and funds, approximately S$6 billion, or US$4.4 billion, would form a tokenized base.
Even if only 2–5% of that base interacts as collateral near crypto, the effective liquidity adjacency would be about US$90 million to US$220 million.
Wider collateralization of tokenized money market funds across banks would lift that figure, and Project Guardian’s links with foreign banks would expand distribution.
A slow retail ramp, driven by suitability checks and onboarding, would push the impact below US$100 million.
The global context supports scale.
BCG and ADDX project that asset tokenization could reach approximately US$16.1 trillion by 2030, and BIS papers emphasize the importance of unified ledgers, legal certainty, and delivery-versus-payment designs that reduce settlement risk.
The value proposition that resonated in Hong Kong’s digital bonds is concrete: T+5 to T+1, lower counterparty and margin costs, and compatibility with incumbent market utilities.
Regulatory timing will dictate how quickly these rails convert into usable liquidity
As these factors are codified in rules and grants in Asia’s three hubs, wallets and tokenized cash become standard operating tools rather than experiments, and crypto markets benefit from tighter spreads and deeper collateral pools as a byproduct.
Below is a concise milestone table for reference.
| Market | Milestone (policy/rail) | Date | “So what” for crypto |
|---|---|---|---|
| Japan | FSA discussion paper (Eng.), disclosure classes, custody reaffirmed, 2025 PSA bill submitted | Apr–Jul 2025 | Lower legal and ops risk, broader exchange products, smoother BTC and ETH distribution |
| Hong Kong | World’s first multi-currency digitally native green bond (HK$6bn) on Orion, DBGS subsidy | Feb–Nov 2024 | T+1 settlement and cost reduction, grants tilt issuers to digital rails, persistent wallets |
| Hong Kong | Corporate digitally native notes on HKEX, BoCom digitally native bonds | Sep 2024–Jan 2025 | Non-sovereign issuance de-risks rails through diversity of issuers |
| Hong Kong | Third HKSAR digital bond batch marketed | Nov 2025 | More volume primes CMU-linked wallets near crypto venues |
| Hong Kong | Stablecoin licensing bill passed | May 2025 | Regulated settlement tokens can operate alongside digital bonds |
| Singapore | First retail tokenized fund (Franklin OnChain MMF) approved by MAS | May 2025 | Retail-grade on-chain cash, future collateral for crypto |
| Singapore | DBS, Franklin Templeton, Ripple list sgBENJI and outline collateralization | Sept 2025 | Tokenized MMF as tradable collateral, tighter spreads |
According to HSBC’s digital bond case study, the operational delta is measurable in terms of time and margin, which is what scales when boards request repeatable savings.
According to the HKMA’s grant program, issuers can recover up to HK$2.5 million per issuance, which turns pilot economics into routine issuance economics.
According to the FSA, cold-wallet segregation remains the principle in Japan.
According to The Business Times, Singapore’s AUM base is at a record level. These are the anchors that connect policy to flow.
The immediate watchpoints are the FSA’s synthesis of public comments and movement on market conduct scope, the size and timing of Hong Kong’s third HKSAR batch, and DBGS uptake among corporates and SOEs, as well as the retail distribution of the Franklin fund, plus collateral acceptance beyond DBS under MAS’s Project Guardian umbrella.
Hong Kong’s third HKSAR digital bond batch is now being marketed.