November 2, 2023

HSBC Uses Blockchain To Digitize Gold Assets



HSBC started to utilize blockchain technology to digitize gold assets to modernize the traditional London gold market after developing a blockchain-based platform to convert gold assets stored in its London vault into digital assets.

Mark Williamson, head of global FX and commodities partnerships and propositions at the bank, explained this development in a recent interview with Bloomberg.

The advanced system generates digital assets corresponding to physical gold bars, which can be exchanged through HSBC’s exclusive trading platform.

HSBC’s foray into using blockchain technology for gold trading is not the first in the industry.

In 2016, cryptocurrency startup Paxos collaborated with Euroclear to build a blockchain platform for facilitating trades in the London bullion market. However, the partnership dissolved the following year. Nevertheless, Paxos has persisted in the field with its digital asset Pax Gold, which has a total market cap of $479 million.

What sets HSBC’s approach apart is its dominant presence in the precious metals market. The bank is not only one of the largest custodians of such metals on the planet but also one of the four main clearing entities in the London gold market. The London gold market, where $30 billion worth of gold is traded daily, is massive.

As per the London Bullion Market Association, about 698,000 gold bars, worth an estimated $525 billion, are presently stored in vaults across Greater London. Despite its enormous size, the London gold market still uses outdated manual record-keeping techniques and only trades over the counter.

Williamson stated that the newly introduced blockchain system for gold has the potential to enable retail investors to invest directly in physical gold, depending on the regulatory landscape in their respective jurisdictions. However, the platform is currently aimed primarily at institutional investors.

HSBC’s adoption of this blockchain system for gold is consistent with the bank’s broader commitment to harness distributed ledger technology. Previously, the bank introduced HSBC Orion, a platform designed for the issuance and management of assets such as digital bonds.

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