HSBC at the forefront of digitalization: Tokenization of tangible assets is central

Hong Kong’s leading bank, HSBC, is investing heavily in tokenizing tangible assets (so-called Real World Assets). This includes things like gold, but also bonds and things like real estate.

This strategic move is part of HSBC’s plan to make Hong Kong a leader in digital finance. It seems that China is trying to catch up in the field of Bitcoin and crypto in this way (via Hong Kong).

Focus on gold and bonds

The updated strategy emerged with the introduction of the HSBC Gold Token, which is the first of its kind in Hong Kong. During a media event, CEO Noel Quinn highlighted the benefits of tokenization for the financial industry.

“Tokenization is a more efficient way of trading and provides more liquidity of funds. In theory you can tokenize anything. For me, the most important thing is that there is value behind the token. Is he predictable? Does he really exist?”, says Quinn.

Tokenized products are, as it were, a digital representation of physical assets on a blockchain. This method makes it possible to invest directly or distribute the assets through intermediaries. The Hong Kong Securities and Futures Commission recognizes that tokenization of tangible assets is essential for the modernization of trading and financial practices.

Collaboration between traditional and decentralized systems

HSBC deliberately focuses on tangible assets such as gold and bonds, and consciously stays away from existing cryptocurrencies.

“A cryptocurrency may be based on the same technology, but is much more volatile and unpredictable. HSBC would rather stay away from that,” says Quinn.

However, it is true that public blockchains such as Ethereum require cryptocurrency to ensure transparency and decentralization. This is crucial for decentralized financial systems, as opposed to the centralized models of traditional banks.

In a broader global move, the Bank for International Settlements (BIS) and seven central banks have launched Project Agorá. This project aims to merge digital and traditional financial systems to optimize global financial operations.

The project addresses inefficiencies in cross-border payments by integrating tokenized commercial and central bank assets into a single database. At the same time, financial controls, such as those against money laundering, are being improved.

Furthermore, UK Finance is building on their pilot with an experimental ledger to track bank payments between major banks such as Barclays, Lloyds and Citigroup. This pilot is a step towards a commercial system that can use tokenized assets to make cross-border transactions smoother, faster and more secure.

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