One of the top bullion banks in the world, HSBC Holdings Plc, has introduced a blockchain-based platform to update the manual and antiquated procedures used by the London gold market. The new technology provides a digital depiction of gold bars for trade and tokenizes ownership of actual gold kept in HSBC’s London vault.
Tokenizing Physical Gold, HSBC Offers a Contemporary Take on Gold Trading
HSBC’s Global Head of FX and Commodities Partnerships and Propositions, Mark Williamson, said in an interview that their creative method makes use of distributed ledger technology. This “cutting-edge” method makes transaction through HSBC’s single-dealer platform smooth by representing gold bars with digital tokens.
HSBC is not the first company, though, to try use blockchain technology to make investing in gold easier. Blockchain startup Paxos and Euroclear worked together in 2016 to develop a blockchain-based settlement tool for deals on the London bullion market. Despite the dissolution of their collaboration a year later, Paxos persisted in offering Pax Gold, a digital token backed by real gold that, as of late, had a market value of $479 million.
HSBC is unique in this industry because of its large presence and influence in the bullion market. As one of the largest precious metals custodians and one of the four clearing members of the London gold market, HSBC is an important player in a system where over $30 billion worth of gold transactions occur every day.
Introducing Blockchain Technology to the Bullion Market: A Step Toward Modernization
Even with the London gold market’s enormous size—roughly 698,000 gold bars worth $525 billion are kept in the Greater London region—it still relies mostly on antiquated manual record-keeping and runs exclusively over-the-counter. The goal of HSBC’s blockchain technology is to expedite and simplify this procedure so that customers can more easily monitor their ownership of gold, even down to the bar’s serial number.
In contrast to the typical 400 troy ounces for a London gold bar, one token in HSBC’s tokenized system is equal to 0.001 troy ounces, improving accessibility and efficiency. Although institutional investors are the platform’s primary target at this time, it might eventually be modified to allow regular investors to directly invest in actual gold, if local regulators give their consent.
This project is a component of HSBC’s larger endeavors to incorporate blockchain technology into many aspects of its business, including the issuance and storage of digital bonds through HSBC Orion. With major banks like JPMorgan Chase & Co., Euroclear, and Goldman Sachs Group Inc. launching more blockchain-based applications, the financial industry is watching to see if these innovations will catch on and improve the conventional financial infrastructure as promised.
According to a report by Bitcoinist, HSBC has incorporated blockchain technology into its gold trading operations, capitalizing on the rapidly growing tokenized assets market, which is expected to reach an impressive $16 trillion by 2030. Because of the industry’s promising development and quick change, several cryptocurrencies are poised for potentially enormous growth.
With the goal of converting physical assets, like as real estate, into digital form, the XRP Ledger ecosystem is leading the way in the tokenized assets market. XRP is even more entrenched in this space because to Ripple’s continued partnerships with international banks to investigate useful uses for central bank digital currencies (CBDCs).
Conversely, TrueFi and Pendle Finance are becoming major players, creatively fusing blockchain technology with traditional banking. With its TRU token, TrueFi is revolutionizing the lending industry by providing cryptocurrency loans devoid of collateral and independent of a user’s creditworthiness.
With a $65 million market capitalization as of right now, Pendle Finance is luring institutional investors to the blockchain with a range of financial products in addition to making progress in real-world assets. These cryptocurrencies are positioned to prosper as the tokenized assets market expands.
