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HSBC Plans on ‘Tokenizing’ $20bn Worth of Paper Assets using Blockchain

December 3, 2019
Ross Peili


HSBC Plans on ‘Tokenizing’ $20bn Worth of Paper Assets using Blockchain

British banking giant HSBC is planning to ‘tokenize’ $20 billion worth of paper assets using a new blockchain-based custody platform called ‘Digital Vault’, in what Reuters dubs as “one of the biggest deployments yet of the widely-hyped but still unproven technology by a global bank”.

In any case, and regardless of what Reuters thinks about distributed ledger technology (DLT), the London-based financial institution is planning to perform the shift by the end of the first quarter of 2020.

In today’s terms, the HSBC move would be equal to an over 15% shift in Bitcoin (BTC), the world’s leading blockchain-powered digital currency that’s currently sitting at a market capitalization of $133 bn.

Neither HSBC nor Reuters made crystal clear which company is behind the architecture of the so-called ‘Digital Vault’ and a typical web-research made things even more confusing, with most sources suggesting that it must be an in-house DLT platform.

R3 might be behind this one as well

Now, I might be overextending but I know for a fact that HSBC and ING were among the first banking institutions to test R3’s Corda back in 2018 and recent announcements want HSBC testing R3’s other blockchain solutions as well, including but not limited to R3’s Voltron.

Just last month, Deutsche Boerse & Swisscom also publically announced they will be using R3’s blockchain for a new ‘securities settlement solution’, and this one’s not really different if you’d forget about the titles.

An HSBC spokesperson told Reuters that the new platform, known as ‘Digital Vault’, will “give investors real-time access to records of securities bought on private markets, and (it) seeks to capitalize on booming interest in such investments by yield-hungry investors”.

Originally hailing from the US, R3’s plan to conquer the Eurozone with cutting-edge blockchain solutions might just have started to sprout some leaves.

Read More: Mastercard Joins Forces With R3 to Create Cross-Border Payments Ecosystem

The company that was previously a breath away from bankruptcy, not only managed to maintain its position as a top-shelf blockchain provider, but it spread in the heart of the EU’s financial center almost unnoticed by local counterparts earlier this year, despite fears of Brexit shaking things up in the monetary sector.

Race for blockchain-based banking solutions

While many banks jumped into the blockchain hype attempting to come up with that one unique solution that everyone will instantly adopt and increase the bank’s market value as a financial service provider, very few managed to actually present viable solutions that have practical and tested use-cases.

Most of these successful, blockchain-wise, banks are using R3 or Hyperledger as their secret sauce, with very few exceptions preferring public blockchains such as Ethereum, hence R3 has more than a point in this one.

HSBC says that the $20 bn shift is just the first move and that they’re already planning to ‘digitalize’ paper assets worth of near $50 bn in the next year, emphasizing space and time aspects a distributed ledger network offers.

Furthermore, the bank expects the global value of private placements to hit $7.7 trillion by 2022, or increase by 60% compared to 2017 data. At the same time, HSBC predicts that allocations by asset manager clients will jump from 9% to 20% by the same year.