HSBC has announced the launch of a platform that will tokenize gold bullion with a potential market size of $525 billion. Mark Williamson, global head of currency and commodity partnerships and offerings at HSBC, said gold tokenization trading will be done through the HSBC platform and the bank will store gold bullion in its London vaults.
HSBC is entering the era of gold tokenization
HSBC, one of the world’s largest financial institutions, has begun using tokenization technology to modernize the precious metals trading industry. The bank announced the launch of a gold tokenization platform that will simplify gold trading and give traders better control over the bullion they own, said Mark Williamson, HSBC’s global head of FX and commodity partners and offerings.
Gold bars in the platform will be tokenized, and owners will be able to track their bars by serial number and the vault in which they are held, making it “faster and less cumbersome” to find such bars, Williamson said. Currently, such records are kept manually and are sometimes outdated, given the nature of the over-the-counter gold markets.
Williamson also said HSBC plans to use the system, which uses tokens representing 0.001 troy ounces of gold, in other precious metals markets as well.
While Williamson said the tokenization system could allow retail users to invest directly in gold fractions when permitted by law, HSBC is currently only targeting the institutional market, which has a potential volume of about $525 billion in the London area.
HSBC is not the first organization to enter the gold tokenization market. In 2016, Paxos partnered with Euroclear to offer an on-chain settlement service for tokenized gold, which was discontinued a year later. However, Paxos still offers tokenized gold in the form of pax gold, a token representing one troy ounce of gold stored in the vaults of the London Bullion Market Association (LBMA).
Tether, the USDT stablecoin company, also offers the XAUT gold token. However, the significance of HSBC’s announcement lies in the sheer volume of bullion market volume flowing through its platforms: it is one of the largest precious metals brokers in the world, and just one of four clearing institutions in the London gold market.