Mark Williamson, HSBC’s London-based global head of foreign exchange partnerships and propositions, continually assesses the effects of digital assets and currencies on liquidity, capital and collateral. In an interview with Delano, Mr. Williamson provides a first-hand look at HSBC Gold Tokens, a digital asset based on distributed ledger technology, specifically available on HSBC’s Orion platform, and backed by physical gold held in HSBC gold reserves.
Could you give us an overview of the HSBC Orion platform and the concept of gold tokenization?
Mark Williamson. is the brand we use for our digital asset platform. HSBC Orion has two tokenization engines, one for the issuance, settlement and servicing of dematerialized securities such as digital bonds, and the other for the tokenization of physical assets such as gold loco London held in HSBC’s London vault.
In November 2023, we launched physical gold tokenization loco London for institutional clients, and in March this year we launched the HSBC Gold Token for retail clients based in Hong Kong. Loco London physical gold tokenization for our institutional clients, as well as our retail clients in Hong Kong, is powered by the same tokenization engine.
For the issuance of digital bonds, we launched HSBC Orion in January 2023, under Luxembourg law, with the issue of digital sterling bonds from the European Investment Bank.
Since then, HSBC Orion has been available in Hong Kong for the issuance of digital bonds. In Hong Kong, HSBC Orion is part of the Central Moneymarkets Unit infrastructure and has been used by the HKMA [Hong Kong Monetary Authority] for Hong Kong’s first digital native bond issuance in February this year.
Tokenization can reduce the need for post-trade reconciliations. It automates clearing and settlement, and brings efficiency, liquidity, transparency and accessibility through fractionalization that can democratize ownership of underlying assets, such as gold.
What are the advantages of gold tokenization over traditional exchange-traded funds?
“We view these as complementary products, in the same way that mutual funds and ETFs have coexisted for over 20 years. Tokenization offers investors a new way to gain exposure to assets such as gold. With an ETF, individuals have chosen to buy and sell ETF shares through their brokerage account.
Tokenization also provides financial institutions with a direct way to gain greater visibility into their ownership of the underlying allocated gold, down to the serial number and provenance of the gold bars held in the London vault. from HSBC. Using distributed ledger technology and intelligent workflows on the HSBC Orion platform, this removes operational friction from the creation and redemption of gold tokens, through to settlement (when ownership of the tokens changes from hand).
Through gold splitting, down to 0.001 troy ounces [équivalent à 31,1 milligrammes]we are able to democratize gold ownership – for example, for retail investors in Hong Kong through their online banking account or mobile banking – by making gold investment more accessible.
Is HSBC planning a gradual transition from gold bonds and ETFs to gold tokens?
“No.
Do HSBC Gold Tokens represent exclusively physical gold held by HSBC, or do they also include gold from partner institutions?
“Only gold physically held in HSBC’s London vault.
Are HSBC gold tokens currently available to retail investors in the European Union, and what are the legal barriers to offering them to retail customers?
“Only in Hong Kong, where there is regulatory approval for retail investors.
Tokenized physical gold is available to international institutional clients trading with HSBC London plc.
HSBC continues to work with regulators globally to roll out tokenized physical gold for institutional and retail investors who buy, hold and sell gold loco London, the safest and most liquid gold market in the world world.
Can you give us an estimate of the total value of HSBC gold tokens available today?
“HSBC has the largest trading vault in the Emea region and is one of four precious metals clearers and custodians for the gold market. Using DLT technology to complement our inventory management system, we are able to quickly create and trade tokens from the gold bars available in our London vault. This means that potentially all physical gold can be turned into tokens in HSBC’s London vault.
Besides gold, what other real assets does HSBC see as viable options for tokenization?
“Other precious metals, like silver.
Given potential policy rate adjustments by central banks around the world, how do you view gold, and by extension gold tokens, as investment opportunities?
Gold is considered a safe haven, especially in times of geopolitical and interest rate uncertainty. The price of gold, like that of any commodity, can fluctuate depending on the propensity or not of investors to take risks.
This article was published for the Delano Finance newsletter, the weekly Source of financial information in Luxembourg. .
