HSBC Tokenizes Ownership of Physical Gold

HSBC announced the first trades tokenizing the ownership of physical gold held in HSBC’s London vault, using distributed ledger technology (DLT). According to a story in MarketsMedia news, HSBC has developed this capability by creating a ‘digital twin’ of an existing physical asset – specifically loco London gold that is custodied in HSBC’s vault. Tokenized physical gold can be traded between HSBC and institutional investors through the HSBC Evolve single dealer platform, or through an application programming interface (API). HSBC’s approach to gold tokenization generates a permissioned digital representation of clients’ physical gold holdings, which is integrated into HSBC’s operational infrastructure, including HSBC Evolve. 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. This approach enables an automatic allocation of gold bars, which meet investors’ criteria, and then tokenizes them. While loco London gold bars are 400 troy ounces, one token on HSBC’s gold tokenization platform is equivalent to 0.001 troy ounce. In due course, this could enable fractionalization 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. HSBC’s gold tokenization approach complements HSBC Orion, the bank’s existing platform for issuing and storing native digital assets such as digital bonds.