HSBC Tokenize London’s Outdated Gold Market Using Blockchain

HSBC Holdings Plc has introduced a platform that tokenizes ownership of actual gold kept in its London vault using distributed ledger technology, said Mark Williamson, global head of FX and commodities partnerships and propositions, in the interview.

HSBC’s single-dealer platform allows users to trade digital tokens created by the new system that represents gold bars. HSBC’s influence in the bullion market is what makes it unique. It is one of the biggest holders of precious metals in the world and one of the four clearers on the London gold market, where more than $30 billion worth of the metal is traded daily.

The London Bullion Market Association estimates that there are over 698,000 gold bars, valued at approximately $525 billion, kept in vaults in the Greater London area. Even with its enormous scale, the London gold market still conducts all of its business over the counter and depends largely on human record keeping.

According to Williamson, clients can more easily track the gold they possess through the platform, even down to the serial number of each bar, making the process “quicker and less cumbersome” when blockchain technology is used. He also mentioned that HSBC intends to eventually add more precious metals to its system.

A London gold bar is worth 400 troy ounces, but one token on HSBC’s new system is worth 0.001 troy ounces, the bank stated in a statement. If local laws in the areas where they are based allow it, the technology may eventually be utilized to enable ordinary investors to make direct investments in actual gold. Institutional investors will be the primary emphasis initially, according to Williamson.

The HSBC gold system is a component of the bank’s larger initiative to leverage blockchain technology, which also includes the HSBC Orion platform, which is now in use for the issuance and storage of assets like digital bonds.

HSBC is not the first company to try to make gold investing easier with blockchain technology. Cryptocurrency startup Paxos partnered with Euroclear in 2016 to develop a blockchain-based settlement service for trades on the London bullion market. However, the following year, the corporations called off their relationship.

Also Read: HSBC Tests Tokenized Deposits with Ant Group

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