HSBC Claims World First with Tokenised Gold
Posted by Colin Lambert. Last updated: November 3, 2023
HSBC has announced the first trades tokenising the ownership of physical gold custodied in its London vault, using distributed ledger technology (DLT); the bank says it has developed this capability by creating a ‘digital twin’ of an existing physical asset – specifically loco London gold.
Tokenised physical gold can be traded between HSBC and institutional investors through the HSBC Evolve single dealer platform, or through an API. HSBC says its approach to gold tokenisation generates a permissioned digital representation of clients’ physical gold holdings, which is integrated into its operational infrastructure, including HSBC Evolve.
This provides a digital overlay for clients to see their tokenised gold trades and positions that correspond with their physical holdings. Consequently, this allows for an automated and, therefore, more efficient and cost-effective way for investors to keep track of their allocated as well as unallocated gold and enables an automatic allocation of tokenised gold bars, which meet investors’ criteria.
While loco London gold bars are 400 troy ounces, one token on HSBC’s gold tokenisation platform is equivalent to 0.001 troy ounce. In due course, the banks says this could enable fractionalisation of loco London gold bars and direct investment by retail investors, depending on the jurisdiction and regulatory framework of where the retail investor is based.
“As one of the earliest adopters of DLT, we are pleased to reinforce our leadership position in the gold market by tokenising physical gold,” says Richard Bibbey, HSBC’s global head of FX, EM Rates and commodities. “We continue to pave the way for improving the post-trade market infrastructure of capital markets.”
John O’Neill, global head of digital assets strategy, Markets and Securities Services, HSBC, adds, “Tokenising physical gold represents a further advance in HSBC’s overall digital assets strategy. In addition to demand for native digital assets, we are seeing appetite for tokenisation solutions that can maintain a link to specific real-world use cases, such as gold. Our approach to gold tokenisation complements HSBC Orion, and is part of our commitment to creating a world-leading set of digital asset capabilities to best serve the needs of our clients.”