HSBC has announced that it is the "first" bank in the world to offer tokenised gold.

This week the company launched its first trades tokenising the ownership of physical gold held in the bank’s London vault using distributed ledger technology (DLT).

To carry out the trades, HSBC created a digital twin of an existing physical asset, specifically loco London gold custodied in its vault.

HSBC says that tokenised physical gold can now be traded between the bank and institutional investors through the HSBC Evolve single dealer platform, or through an API.

“As one of the earliest adopters of DLT, we are pleased to reinforce our leadership position in the gold market by tokenising physical gold," said Richard Bibbey, HSBC global head of FX, EM rates and commodities. "We continue to pave the way for improving the post-trade market infrastructure of capital markets.”

The move comes after HSBC announced a major push into blockchain-based tech through the launch of its proprietary tokenisation platform last year.

The HSBC Orion platform allows financial institutions and corporates to use to “issue digital bonds based on distributed ledger technology.”

The platform leverages blockchain technology as a ‘single source of truth’, with asset and settlement tokens sitting natively and securely on the platform’s ledger and transactions occurring by exchanging these tokens.

In its approach to gold tokenisation, the bank generates a permissioned digital representation of clients’ physical gold holdings, which is integrated into HSBC’s operational infrastructure, including HSBC Evolve.

This provides a digital overlay for clients to see their tokenised gold trades and positions that correspond with their physical holdings.

John O’Neill, global head of digital assets strategy, markets and securities services at the bank said that tokenising physical gold represents a further advance in its overall digital assets strategy.

"In addition to demand for native digital assets, we are seeing appetite for tokenisation solutions that can maintain a link to specific real-world use cases, such as gold," he continued.

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