HSBC utilizes blockchain to build a system for tokenizing physical gold, changing the rules of the gold trading game.

HSBC harnesses blockchain technology to create a system for digitizing physical gold, revolutionizing the gold trading landscape.

Compiled by: The Blockchain Knight

HSBC Holdings Plc, one of the world’s leading banks, has launched a blockchain-based platform to modernize the traditional manual processes of the London gold market. This new platform tokenizes the ownership of physical gold stored in HSBC’s London vault, representing the gold in digital form.

In an interview, Mark Williamson, the Head of FX and Commodities Collaboration and Propositions at HSBC, revealed that their innovative system uses distributed ledger technology. This cutting-edge system uses digital tokens to represent gold bars and facilitates seamless transactions through HSBC’s single trading counterparty platform.

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However, HSBC is not the first company to attempt to simplify gold investment using blockchain technology. In 2016, crypto startup LianGuaixos collaborated with Euroclear to create a blockchain-based settlement service for trading in the London gold and silver market. Although they ended their partnership after a year, LianGuaixos continues to offer LianGuaix Gold, a digital token backed by physical gold.

HSBC stands out in this field due to its significant influence in the gold and silver market. As one of the largest custodians of precious metals and one of the four clearing members of the London gold market, HSBC plays a crucial role in this industry that witnesses daily gold transactions worth over $30 billion.

Despite the large scale of the London gold market, with approximately 698,000 gold bars worth $525 billion stored in the Greater London area, it still heavily relies on outdated manual records and operates entirely through counters.

HSBC’s blockchain platform aims to simplify and optimize this process, providing customers with a more convenient way to track their gold ownership, including tracking the serial numbers of each gold bar.

HSBC’s tokenization system aims to enhance accessibility and efficiency, with one token equivalent to 0.001 troy ounce of gold, while the standard for London gold bars is 400 troy ounces. Although the initial focus is on institutional investors, the platform may be adjusted in the future, allowing retail investors to directly invest in physical gold with approval from local regulatory authorities.

This initiative is part of HSBC’s broader effort to integrate blockchain technology into its various businesses. Previously, HSBC launched a platform called HSBC Orion for issuance and storage of digital bonds.

As major institutions such as JPMorgan Chase & Co., Euroclear, and Goldman Sachs increase their blockchain-based applications in the financial industry, the market will witness whether these innovations can be adopted on a scale and bring the expected improvements to traditional financial infrastructure.

As reported by Bitcoinist, HSBC’s integration of blockchain technology into gold trading enters the booming tokenized asset industry. It is estimated that by 2030, the industry’s size will reach a staggering $16 trillion, which makes certain crypto assets have the potential to skyrocket.

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