Page 27 - Bullion World Volume 3 Issue 12 December 2023

Bullion World | Volume 3 | Issue 12 | December 2023

Why DLT? equivalent to 0.001 troy ounce. In due course, this could
The use of DLT can provide significant benefits, enable fractionalisation of loco London gold bars and
streamlining clearing and settlement process while direct investment by retail investors, depending on the
ensuring an immutable record of ownership is jurisdiction and regulatory framework of where the retail
maintained. investor is based.

HSBC’s approach to gold tokenisation generates a Future Use Cases
permissioned digital representation of clients’ physical HSBC’s tokenised physical gold offering has the potential
gold holdings, which is integrated into HSBC’s to increase the use of gold as collateral. Traditionally,
operational infrastructure. This provides a digital overlay using gold as collateral requires the collateral holder to
for clients to see their tokenised gold trades and allocate gold at their clearing bank after receiving an
positions that correspond with their physical holdings, unallocated credit from the collateral provider. Tokenised
including bar serial numbers, brands, and even assay physical gold would, however, allow for immediate
amounts. recognition of ownership by the collateral receiver of
the full amount of collateral received, making the whole
Tokenisation, therefore, allows for an automated and process much more efficient.
more efficient and cost-effective way for investors to
keep track of their physical gold. The approach enables There are also many potential future use cases for the
an automatic allocation of gold bars, which meet tokenisation of physical assets outside of gold. The most
investors’ criteria, and then tokenises them. immediate would be to extend HSBC’s platform to other
Institutional investors with allocated bar holdings do not precious metals such as silver, platinum and palladium to
have credit risk to HSBC as the DLT ensures the link provide a complete digital precious metals offering.
between tokenised assets and physical assets remains Last but not least, a key factor in the growth of digital
and is immutable. They are also able to request physical assets will continue to be the development of the legal
delivery of their bars, should they wish to move gold and regulatory frameworks across jurisdictions, with
outside of the network. standardisation essential for the full benefits of the
technology to be realised.
While loco London gold bars are 400 troy ounces,
one token on HSBC’s gold tokenisation platform is

John O’Neill, Global Head of Digital Assets
Strategy, HSBC, said: “In addition to demand
for native digital assets, we are seeing
appetite for tokenisation solutions that can
maintain a link to specific real-world use
cases, such as gold.”

Richard Bibbey, Global Head of FX, Emerging
Market Rates & Commodities, HBSC, said:
“As one of the earliest adopters of DLT, we are
pleased to reinforce our leadership position in
the gold market by tokenising physical gold.
We continue to pave the way for improving
the post-trade market infrastructure of capital
markets.”

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