To date HSBC’s efforts with DLT and tokenization have focused on institutions. Its HSBC Orion blockchain platform was used for a European Investment Bank (EIB) bond issuance and the largest digital bond issuance so far, Hong Kong’s $756 million green bond. Last year it launched a solution that tokenizes gold, also targeted at institutions. Now, the Hong Kong arm is eyeing the use of tokenization in some of its wealth management initiatives.
According to the Hong Kong Economic Journal, HSBC is exploring the introduction of tokenization solutions to enable customers to invest in physical and virtual assets in a compliant manner. Sami Abouzahr, HSBC’s Hong Kong Head of Wealth Solutions, emphasized that not all offerings plan to target professional investors. Perhaps the tokenized gold offering may expand its target market.
Regarding virtual assets, HSBC Hong Kong bought land in The Sandbox metaverse back in 2022. It also launched a metaverse fund around the same time.
HSBC’s tokenized structured products trial
Elsewhere in Asia, HSBC has explored using blockchain for structured products, which are often instruments linked to derivatives. As part of Singapore’s Project Guardian, HSBC collaborated with UOB and SGX-backed tokenization platform Marketnode.
Structured products are bespoke and usually involve a manual issuance process, making them prone to human error. They also require quite a bit of coordination.
In the Project Guardian trial, HSBC took on the role of the whitelisted issuer, using the token factory to mint tokens on a permissionless blockchain.
Results from the trial demonstrated digitalizing the issuance will reduce costs and issuance times. Lifecycle events such as coupon payments and payout calculations were automated, and transparency was enhanced. Participants concluded that lower costs made smaller issuances more practical, allowing for wider distribution. Automation also supports more product customization.
Structured products could be a good market fit for DLT. Deutsche Börse’s Clearsream has its D7 digital issuance solution with the DLT capable of functioning as a centralized securities depository (CSD) and a decentralized one, depending on the issuance. German laws support both of these digital registry modes. So far the centralized version has been used to issue more than 15,000 structured products. A single client issued more than 150 structured products this morning alone.
