By PYMNTS | November 1, 2023
HSBC Holdings, one of the world’s leading bullion banks, aims to revolutionize the London gold market by harnessing the power of blockchain technology.
The bank has introduced a platform that uses distributed ledger technology to tokenize ownership of physical gold stored in its London vault, Bloomberg reported Wednesday (Nov. 1), citing an interview with Mark Williamson, global head of FX and commodities partnerships and propositions.
The new system generates digital tokens representing gold bars, facilitating easier trading through HSBC’s single-dealer platform, according to the report.
While HSBC is not the first to explore blockchain’s potential in simplifying gold investing, its prominent position in the bullion market sets it apart, the report said. As one of the largest custodians of precious metals globally and one of the four clearers in the London gold market, HSBC’s foray into blockchain-based gold trading could have a significant impact.
The current gold market in London relies on manual record-keeping and over-the-counter trades, resulting in a cumbersome process, per the report. By leveraging blockchain technology, HSBC aims to expedite and streamline the process, enabling clients to effortlessly track their gold ownership through the platform.
The use of blockchain technology in the gold market has gained attention in recent years, according to the report. In 2016, crypto startup Paxos collaborated with Euroclear to establish a blockchain-based settlement service for trades on the London bullion market. However, the partnership dissolved the following year. Nevertheless, Paxos still offers a digital token called Pax Gold, backed by physical gold, with a total market value of $479 million.
HSBC’s gold system is part of a broader initiative by the bank to leverage blockchain technology, the report said. It already operates a platform called HSBC Orion, facilitating the issuance and storage of assets like digital bonds.
In 2018, HSBC completed its first trade finance transaction on blockchain technology, collaborating with ING to complete a transaction for Cargill related to a shipment of soybeans transported from Argentina to Malaysia.
In addition, the adoption of distributed ledgers by major financial institutions such as J.P. Morgan Chase & Co., Euroclear and Goldman Sachs signals an acceleration in the implementation of blockchain technology in mainstream finance, per the Bloomberg report.
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