HSBC Announces Custody Service for Non-Cryptocurrency Digital Assets

HSBC, in collaboration with Swiss digital asset firm Metaco, has revealed its plan to introduce a custody service for blockchain-based assets, with the launch scheduled for 2024. This service will cater to institutional clients seeking to safeguard blockchain-based tokens that represent conventional financial assets, distinct from cryptocurrencies or stablecoins.

Last week, HSBC announced the creation of tokens that symbolize physical gold stored in its London vault. In the previous year, the bank inaugurated HSBC Orion, a digital asset platform that enables financial institutions to issue tokenized securities, also known as blockchain-based versions of financial assets.

Zhu Kuang Lee, Chief Digital, Data, and Innovation Officer at HSBC, expressed, “We’re seeing increasing demand for custody and fund administration of digital assets from asset managers and asset owners as this market continues to evolve.” Blockchain, a digital ledger system for recording token ownership, is recognized for its potential to enhance trading efficiency and transparency.

To date, blockchain’s primary application has been in cryptocurrencies, a relatively small segment of the global financial system. The total value of all cryptocurrencies stands at around $1.4 trillion, having decreased from its peak above $3 trillion in late 2021, according to CoinGecko data. While HSBC did not provide a specific market size for blockchain-based assets excluding cryptocurrencies, it’s evident that banks and financial institutions have made significant investments in exploring the various applications of blockchain technology.

In 2019, HSBC introduced its Digital Vault platform, enabling investors to access digital records of securities acquired in private markets. This move demonstrates HSBC’s ongoing commitment to embracing the potential of blockchain technology in various facets of financial services.