HSBC goes live with tokenized deposits in Hong Kong amid global banking shift

• Multinational bank,  HSBC Holdings, has launched a blockchain-based settlement service in Hong Kong. The product which tokenizes deposits is the first of its kind by a regulated financial institution in the city. 

According to a report from SCMP citing HSBC official statements, the settlement service allows the conversion of bank cash deposits into digital tokens on the blockchain. This will allow the bank’s corporate customers to make real-time payments using US Dollars (USD) and Hong Kong Dollars (HKD).

The service is expected to reduce the cost of client transactions and ensure that payment can happen within a shorter period and at all times. The Hong Kong Monetary Authority (HKMA) supported the initiative through its Supervisory Incubator for Distributed Ledger Technology.

Speaking on the achievement, HSBC’s global head of domestic and emerging payments for global payments solution, Lewis Sun, said it can improve payments and cash management.

Sun said:

“Tokenised deposits, when supported by regulated financial institutions, can offer a safe and fully compliant approach to improving payments and cash management for [companies].”

The service already has its first user, with Alibaba affiliate Ant International using it for an instant fund transfer. Ant noted in a separate press release that the pilot test of the product using Ant’s blockchain-based global treasury management platform, the Whale.

HSBC integrated the experience from the pilot testing into the tokenized deposit service before the full launch.  Currently, the service is only available in Hong Kong, but HSBC plans to expand it to other countries in Asia and Europe by the year’s second half.

Big banks are embracing tokenization

Meanwhile, the launch of the tokenized deposits is only another step in the long-term tokenization plan for HSBC. The bank launched gold tokenization as far back as 2023 and plans to use the blockchain network and technologies to create a new digital transfer and settlement infrastructure.

Part of its planned use cases include digital currency settlements and other forms of tokenization. The bank has been exploring various uses of digital ledger technologies with initiatives such as tokenized bonds, the Orion blockchain platform, and several others.

However, it is not alone; several other major banks and financial institutions have identified tokenization as the next frontier for the financial markets. Institutions such as BlackRock, JP Morgan, Visa, Mastercard, and others are all exploring the incorporation of tokenization into payments and financial markets.

Several banks, including Bank of America, Euroclear, and Italian Central Bank, also recently tapped Solana as a tokenization layer after developer R3 partnered with Solana Foundation to connect its private blockchain Corda to the public network.

The massive interest in the sector from every stakeholder, both traditional institutions and fintech companies,   explains why researchers predict it could be worth $30 trillion by 2030.

Hong Kong status as digital finance hub increases

Meanwhile, HSBC’s choice of Hong Kong to launch the tokenized deposit service highlights how the city has become a major hub for global financial innovation. Hong Kong has been active in its efforts to attract financial technology and digital assets companies with regulatory clarity and government-banked initiatives.

Unsurprisingly, the tokenized deposit service is a product of one of such initiatives, with HSBC being one of the key participants in Phase 2 of the city’s e-HKD Pilot Program. The program focuses on banks experimenting with how tokenized fiat currencies can be used in digital asset transactions. The bank has also been involved in HKMA projects such as mBridge and Ensemble.

Interestingly, Hong Kong also recently passed a Stablecoin bill that expands its regulatory framework for digital assets by requiring all stablecoin issuers to get a license from the HKMA. The government claims that the new law, which is expected to come into force this year, will provide financial stability while encouraging innovation.

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