HSBC To Offer Digital Assets Custodial Service for Tokenized Securities

Banking giant HSBC Holdings is soon planning to offer digital assets custodial services for assets such as tokenized securities. In a statement on Wednesday, November 8, HSBC announced its collaboration with Metaco, a technology company owned by Ripple Labs Inc., to develop secure custody services, with plans for the service to be operational by 2024. The banking giant plans to provide these services to its institutional clients.

HSBC Orion Platform to Lead

This new offering will enhance HSBC’s digital asset issuance platform, HSBC Orion, and its recently launched system for tokenized gold, which leverages distributed ledger technology to represent ownership of physical gold stored in its London vault through digital tokens.

HSBC joins a growing list of major financial institutions embracing blockchain-based applications after years of testing the technology that underlies cryptocurrencies. JPMorgan Chase & Co recently introduced its blockchain-based collateral settlement service for clients, while Euroclear unveiled a platform for issuing traditional securities using blockchain technology.

It seems more and more traditional players are showing interest in offering crypto custodial services. Last week, Germany’s third-largest DZ Bank announced a similar offering. DZ Bank is set to commence custody services for crypto securities, starting with assets like a Siemens crypto bond that was originally subscribed to by Union Investment and DZ BANK six months ago. The move allows for potential self-custody of these assets. Deutsche Bank launched similar services back in September 2023.

Growing Demand for Digital Assets Custody

As more and more institutional players join the digital assets market, the demand for custodial services is growing equally. Custody services, in particular, have witnessed significant interest from major players in the industry, providing opportunities for startups in the sector.

However, this trend also highlights the challenges that smaller firms encounter when trying to collaborate with large financial institutions. Ripple, based in San Francisco, projected that the institutional crypto custody market could potentially grow to nearly $10 trillion by 2030, emphasizing the substantial potential in this sector.

On the other hand, banks and asset managers have been investing millions of dollars in leveraging blockchain, streamlining their complex processes and reducing costs.