Today HSBC announced the first trades in gold tokens, where the physical gold is stored in HSBC’s London vault. Using distributed ledger technology (DLT), institutional clients create a digital twin of the physical asset. The tokens can be traded on HSBC Evolve, the bank’s digital FX and precious metals execution platform.
The platform helps clients track trades and the gold they own in an over-the-counter market. Gold bars that meet certain criteria can be automatically tokenised.
While it’s not currently retail focused, it could potentially support fractional gold investment depending on jurisdictional laws. Each token represents 0.001 troy ounces.
HSBC is one of the world’s largest precious metals custodians and one of only four clearers in the London market. HSBC didn’t mention any potential settlement benefits, but atomic settlement is one of the key benefits of DLT. Another is the ability to make collateral more mobile. But it’s probably still early days for that.
“In addition to the demand for native digital assets, we are seeing an appetite for tokenisation solutions that can maintain a link to specific real-world use cases, such as gold,” said John O’Neill, global head of digital assets strategy, markets and securities services, HSBC. O’Neill is also responsible for HSBC Orion, the bank’s DLT bond issuance platform.
HSBC isn’t the first bank to tokenise gold, but it’s certainly the biggest. In January, Russia’s largest bank, Sber, launched a digital gold offering. And in Japan, Mitsui & Co Commodities unveiled a retail-focused offering based on London Metal Exchange gold.
Meanwhile, the World Gold Council and the London Bullion Market Association (LBMA) are deploying an enterprise blockchain solution to trace the supply chain source of gold bullion back to the mines as part of an integrity programme.
