Traditional Financial Institutions Accelerate Digital Assets Efforts

Traditional Financial Institutions Accelerate Digital Assets Efforts

by November 10, 2023

Traditional banking and financial institutions from around the world continue to expand their digital assets offerings, embracing not only tokenization but also cryptocurrencies at a fast-pace in a bid to tap new growth opportunities, improve efficiencies and enhance transparency.

In Europe, HSBC, Euroclear, Deutsche Bank and the London Stock Exchange Group (LSEG) are among those that recently announced digital assets services and tokenization efforts.

HSBC announces new digital assets service

British bank HSBC unveiled this week plans to launch a new digital assets custody service for institutional clients who invest in tokenized securities. The bank will be using technology from Swiss enterprise tech firm Metaco, which was recently acquired by blockchain startup Ripple, to store bonds and other securities.

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The new digital assets custody service, which is set to go live in 2024, will complement HSBC Orion, the bank’s platform for issuing digital assets, as well as HSBC’s recently launched offering for tokenized physical gold, as the bank works towards creating a complete digital asset offering for institutional clients.

HSBC already lets its Hong Kong clients trade in bitcoin and ether exchange-traded funds (ETFs).

Euroclear launches issuance service

The HSBC announcement followed the news that Euroclear, a major European clearinghouse, had launched a solution for the issuance of digital securities.

The Digital Securities Issuance (D-SI) service, which went live on October 24, enables the issuance, distribution and settlement of fully digital international securities – referred to as Digitally Native Notes (DNN) – on distributed ledger technology (DLT).

The World Bank was the first organization to issue digital securities on the new platform.

Deutsche Bank teams up with crypto firm Taurus

In Germany, Deutsche Bank signed in September a partnership agreement with Swiss crypto infrastructure firm Taurus to provide digital asset custody and tokenization services to the bank’s institutional clients. The partnership means Deutsche Bank will, for the first time, be able to hold a limited number of cryptocurrencies for its clients, as well as tokenized versions of traditional financial assets.

The bank participated in Taurus’ US$65 million Series B funding round back in February 2023, and further demonstrated in June its intention to push into the crypto sector when it applied for regulatory approval to operate a custody service for digital assets, including cryptocurrencies.

Stock exchange operator launches digital asset trading platform

In the UK, bourse operator the London Stock Exchange Group (LSEG) is also jumping on bandwagon, unveiling in September that it was working on the launch of a blockchain-powered trading venue that would allow investors to trade tokenized assets, Murray Roos, head of capital markets at the LSE Group, told the Financial Times in September.

The move would see the LSEG becoming one of the world’s first large global stock exchanges to offer extensive trading of traditional financial assets on DLT, following the lead of other bourse operators including Switzerland’s SIX, which launched its DLT-based exchange for digital assets back in 2021.

Asia sees new developments

Banks are also ramping up their tokenization and crypto efforts in Asia. In Singapore, UBS Asset Management launched in October a live pilot of an Ethereum-based tokenized money market fund. The pilot is being conducted through UBS Tokenize, the firm’s dedicated platform for digital assets, as part of Project Guardian, a collaborative industry initiative led by the Monetary Authority of Singapore (MAS).

Meanwhile, Zodia Custody and Zodia Markets, two crypto companies owned by British bank Standard Chartered, are aggressively expanding their services across Asia-Pacific (APAC), launching services in Hong Kong, Singapore, Japan and Australia in recent months.

The tokenization opportunity

These developments highlight the increasing convergence of traditional financial services and digital assets as incumbents increasingly turn to DLT and tokenization to increase efficiency, lower operational costs, and improve accessibility and transparency.

Global management consultancy Roland Berger forecasts that the market for asset tokenization could mushroom to at least US$10 trillion by 2030, representing a 40-fold increase in the value of tokenized assets from 2022 to 2030.

The value of tokenized assets by 2030, Source: Roland Berger, Oct 2023

The value of tokenized assets by 2030, Source: Roland Berger, Oct 2023