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London’s HSBC Bank Begins Gold Trading With Digital Tokens
The financial behemoth, UK’s HSBC Bank, is pioneering gold tokenization, transforming how gold is traded.
Launched in November 2023, this innovative service offers tokenized ownership of physical gold stored in HSBC’s London vaults.
Using distributed ledger technology (DLT), HSBC’s system allows for the trading of digital gold representations, where one token equals 0.001 troy ounce.
HSBC’s platform enables trade between the bank and institutional investors, enhancing gold trading efficiency and security.
This initiative isn’t HSBC’s first blockchain venture.
They’ve previously collaborated with Wells Fargo for multicurrency transaction processing and announced HSBC Orion, a digital bond issuance platform, in 2022.
John O’Neill, HSBC’s head of digital assets strategy, highlights the growing demand for real-world linked tokenization solutions, like gold.
Tokenization, converting physical assets into digital tokens, is increasingly popular, with gold being a prime focus due to its market stability and value.
Gold ranks second in tokenization market cap, just behind USD, indicating its significant role in the digital finance transition.
Key players in this space, Tether Gold and PAX Gold, boast market caps of around $490 million and $480 million, respectively.
HSBC’s move aligns with the broader trend of digitizing financial assets, including bonds and money market funds, signaling a major shift in asset and finance industries.
Experts predict this digital transformation, blending traditional and crypto markets, will continue evolving over the next couple of years. Read more here.
How Does Zucoin Improve Data Portability And Self-Custodial Asset Management?
HSBC’s use of distributed ledger technology for gold tokenization highlights the potential for blockchain in real-world asset tokenization.
For comparison, both blockchains and Splitchains are kinds of distributed ledgers.
But the way you build them can vary immensely.
By tokenizing gold, HSBC has created a digital representation of physical gold holdings, enabling easier trade and ownership tracking.
What opportunities could technologies like Splitchain have here?
Well, HSBC’s solution seems to be mostly centralized.
Provided it’s easy enough, many businesses prefer to manage their own assets, including goods and data.
Many businesses bring in third-party vendors and services once they become too complex and risky to manage themselves.
The original goal of crypto and blockchain was to democratize access, not just modernize traditional systems into newer ledger platforms.
The point of crypto is to level the playing field.
To increase the opportunities for more people, not restrict.
For example, consider the evolution of business funding.
It follows the same path.
Decades ago, banks were the main place a person visited to fund their business.
In recent decades, the rise of venture capital, involving a few key private investors, became a popular way for businesses to get funding.
In the past decade or two, crowdsourcing, opening up funding from the public, became more common where smaller amounts of capital were provided across a bigger number of people.
You can see the path this evolution is going towards.
Each tier still exists, but one thing is clear:
Smaller sizes, but many more pieces.
Crypto, if its goals hold true, would amplify this democratization effect even more.
Transaction friction is reduced.
When friction is reduced, more transactions happen.
The flow of value speeds up even more.
Technologies that focus on decentralization, and increasing it, are fundamental to this.
What’s more, technologies that offer long-term support for micro-transactions will have upsides here.
Splitchain supports 32 decimal places in its transactions.
This is no simple undertaking and requires a lot of testing and consideration.
Traditional cryptocurrencies typically support 8 decimals places.
A greater amount of decimal places means that as the price of a token changes, there’s still enough room to make tiny payments.
Couple this with no in-built transaction fees in the Splitchain network.
With Zucoin’s simple self-managed wallet app, the tokenization process can be made easier, safer and more efficient, without going down a centralized road.
This is particularly important for assets like gold, where provenance and ownership are paramount.
Zucoin’s Splitchain platform solves many often overlooked and deeply-rooted issues within traditional crypto technologies and centralized solutions.
It’s all to keep the original goals and freedoms of Web3 and crypto in mind.
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All the best,
—Rob
MyZucoins
Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.