HSBC plans on digital assets ‘will be grounded in reality’
Hong Kong’s largest commercial bank, HSBC, plans to expand its line-up of tokenised assets so its customers can enjoy the benefits of such digital products, but will make sure these offerings are grounded in reality while staying away from volatile cryptocurrencies, according to the bank’s CEO.
“Tokenisation is a more efficient trading mechanism and provides liquidity to that asset,” Noel Quinn said during a private media round table in Hong Kong last week.
“In theory, you can tokenise anything. The key criteria for me is, is there substance behind the token? Has it got predictability? Does it exist?”
His comments came shortly after the launch of HSBC’s Gold Token, the first such retail product to be issued by a bank in Hong Kong, as the government pushes for the roll-out of more digital assets to the public. Tokenised products can be recorded digitally on a blockchain, offered directly to end-investors, distributed by intermediaries, or traded. They have the potential to reduce operational costs and promote efficiency and transparency, according to the Securities and Futures Commission.
Tokenisation has shown to be cheaper, more efficient and better than “the old-fashioned way of trading”, Quinn said.
“We continue to invest in our tokenisation product line-up. I think tokenisation of gold and bond issues are good [examples],” he added.
“I’m very comfortable with the concept of tokenisation.”
While not mentioning specifics, Quinn said the bank would look at ways to tokenise assets that were “backed by something real”.
Gold and bonds are “a real asset”, whereas a cryptocurrency may be based on similar technology, but is more volatile. HSBC would be “staying away from crypto”, Quinn said.
Speaking at the HSBC Global Investment Summit last week, the city’s regulators were confident Hong Kong will be a world leader in tokenisation. Part of its efforts is the development of a central bank digital currency (CBDC).
While still in its early days, the Hong Kong Monetary Authority (HKMA) launched the second phase of a pilot programme in March to explore use cases for a CBDC. Some of the use cases tested so far include online payments, payments in shops, the collection of government payouts, tokenised deposits, tokenised asset settlement and Web3 trading and clearing.
Meanwhile, the Hong Kong government completed the world’s first multicurrency digital bond offering worth around US$750 million last month. The bonds were directly issued onto HSBC Orion’s private blockchain as part of the HKMA’s Central Moneymarkets Unit.
The blockchain-powered platform reduces the issuance settlement time from five days to one day and makes secondary market trade settlements and coupon payments easier, according to HSBC.