The financial world is on the verge of the next paradigm of asset representation – the impact of which will be much bigger than the move from physical paper to dematerialised/computerised listed securities. This time, the transformation is being led by open protocols embedded into distributed ledgers that create a single shared source of data, and smart contracts that create a frictionless value chain across asset issuance, servicing and wealth management. This is applicable to all assets.
HSBC has been instrumental in the development of the digital ecosystem and has been experimenting with distributed ledgers and tokenisation for the last five years. Our continued pursuit of product innovation has allowed us to create products such as FX Everywhere which helped us reimagine how FX payments can be orchestrated, and Digital Vault to facilitate seamless storage of and access to certificates of private assets.
Digital Vault, built by HSBC in 2019, enables our custody clients to access their private assets - including equity, debt and real estate - directly and in real time, instead of having to request a search of paper-based records1. It currently provides clients’ access to USD20 billion worth of assets on the blockchain.
Blockchain technology is fast entering a mature stage in its lifecycle, and is enabling great applications such as decentralised finance, creating new innovative ‘digital’ asset classes and bringing significant efficiencies across the value-chain. By collaborating with SGX, we pioneered the tokenisation of fixed income securities, the first such end-to-end digitalisation initiative in the Asia bond markets2. The smart-contract enabled issuance platform, which runs in parallel with traditional issuance, has already simulated 10 issuances. It digitized a multi-party work flow and built a minimum viable ecosystem.
The impending transformation is set to change the way markets operate and the roles and functions performed by financial intermediaries. Digital assets will also be a major facilitator of financial inclusion, as it makes investment opportunities accessible to a wider population at viable costs by virtue of fractionalisation and tokenisation.
At HSBC, we firmly believe in the transformative potential of tokenisation and digital assets. Our ambition is to help our clients navigate this transformation and take advantage of the many opportunities in the digital assets ecosystem, especially in view of positive regulatory developments. We are currently working with select partners on developing the capabilities required to support the end-to-end lifecycle of a broad array of digital assets, all the way from issuance to asset servicing. Our objective is to continue to embed cutting edge technologies in our platform to orchestrate services for our clients.
More to come, watch this space!