The first trades of gold tokens, with the actual gold kept in HSBC’s London vault, were disclosed by the bank today. Institutional clients use distributed ledger technology (DLT) to produce a digital twin of the actual asset. HSBC Evolve, the bank’s digital platform for FX and precious metal execution, is where the tokens can be traded.
In an over-the-counter market, the platform assists users in keeping track of their gold holdings and trades. Gold bars that satisfy specific requirements may be tokenized automatically.
Although it isn’t presently targeted at retail, depending on local legislation, it might allow fractional gold investments. A troy ounce is represented by each token.
There are just four major precious metals custodians in the world besides HSBC cleaners in the market in London. Although atomic settlement is one of the main benefits of DLT, HSBC made no mention of prospective settlement benefits. Facilitating increased collateral mobility is another. However, that’s probably early in the game.
According to John O’Neill, Global Head of Digital Assets Strategy, Markets and Securities Services, HSBC, “we are seeing appetite for tokenization solutions that can maintain a link to specific real-world use cases, such as gold, in addition to demand for native digital assets.” O’Neill is also in charge of HSBC Orion, the platform used to issue DLT bonds.
Although it wasn’t the first bank to tokenize gold, HSBC is unquestionably the biggest. The largest bank in Russia, Sber, introduced a digital gold offering in January. Mitsui & Co Commodities also debuted a retail focused sale using gold from the London Metal Exchange.
As part of an integrity program, the World Gold Council and London Bullion Market Association (LBMA) are implementing an enterprise blockchain system to track the origin of gold bullion’s supply chain back to the mines.