HSBC has unveiled a platform that uses distributed ledger technology to tokenise the ownership of institutional clients’ physical gold held in the bank’s London vault.
HSBC creates a ‘digital twin’ of an existing physical asset - specifically loco London gold that is custodied in its vault. The tokenised physical gold can then be traded between HSBC and institutional investors through the bank's Evolve single dealer platform, or through an API.
The tokenisation generates a permissioned digital representation of clients’ physical gold holdings, which is integrated into HSBC’s operational infrastructure, including Evolve. This provides a digital overlay for clients to see their tokenised gold trades and positions that correspond with their physical holdings.
This in turn 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, says the bank.
And, 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 bank says this could enable fractionalisation of loco London gold bars and direct investment by retail investors.
John O’Neill, global head, digital assets strategy, markets and securities services, HSBC, says: "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."