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- HSBC has completed a test to explore the potential of deposit tokenization via blockchain technology.
- According to HSBC’s Vincent Lau, the test shows the capabilities of the banking sector of Hong Kong.
The initiative meant to explore the potential of deposit tokenization using blockchain technology has successfully been tested. According to the report, the process was done by the direction of the “Hong Kong Monetary Authority’s Fintech Supervisory Sandbox arrangement”. The test was also done to monitor the efficacy of real-time treasury fund movement between corporate-held accounts and the HSBC network.
In this case, the test focused on three main functions – issuance, transfer, and redemption of deposit tokens. It can be recalled that China’s Ant Group developed a blockchain platform for this purpose. During the initiative, HSBC was connected to the project and ensured that payments were facilitated across global treasury centers. For now, assets including HKD, CNY, USD, GBP, and EUR have been integrated into the platform for smooth transactions.
Global head of emerging payments, global payments solutions, HSBC, Vincent Lau explained that the test represents the capabilities of the banking sector in Hong Kong. Also, the bank would continue to embrace new technologies and leverage tokenized deposits for treasury management optimization.
The test exemplifies cutting-edge banking capabilities available in Hong Kong as a corporate treasury hub. At HSBC, we will continue to leverage tokenized deposit and other financial innovations to streamline and optimize treasury management for our clients.
It is important to note that HSBC has been involved in several CBDC pilot programs including the Project mBridge. This project focused on cross-border wholesale transactions. It was also an active participant in the SWIFT’s “cross-border CBDC payment orchestration pilot.”
HSBC is also part of the banks participating in the interoperable digital money platform. In the US and the UK, this is identified as the regulated liability network.
HSBC Tokenize Gold
In a separate report, HSBC announced its first trade of gold tokens. Using distributed ledger technology (DLT), the institutional clients create a digital twin of physical assets that can be traded on the banks’ FX platform and precious metal execution, HSBC Evolve. It is worth noting that HSBC exists as one of the largest precious metal custodians. As of June, it had processed more than 3 million intercompany FX transactions in its first year. This is worth around $250 billion.
According to John O’Neill, Global Head of Digital Assets Strategy, Markets, and Securities Services, at HSBC, the bank has been seeing an increasing demand for tokenization solutions.
In addition to the demand for native digital assets, we are seeing an appetite for tokenization solutions that can maintain a link to specific real-world use cases, such as gold.
As one of the active contributors to cross-border payment, the bank recently lauded Ripple (XRP) and its DLT for tremendous efforts. According to HSBC, banks can use the DLT to introduce something similar using CBDC-related tokens.
Practical uses for DLT are multiplying. The post-trade space presents great opportunities but is only one of many potential applications. In time, DLT could even facilitate trading. The next few years will see development accelerate, with commercial imperatives helping to overcome potential obstacles. Engagement and a range of partners will become ever more vital.
