HSBC Utilizes Ripple’s Metaco to Introduce Security Token Custody

HSBC, a prominent global banking institution, has revealed plans to introduce an institutional custody platform for tokenized securities, commonly referred to as security tokens.

Through a partnership with the tech company Metaco, which is a subsidiary of Ripple, HSBC aims to seamlessly integrate its institutional platform, Harmonize, with a new custodial service for digital assets. The initiative was officially announced on Nov. 8.

Anticipated to be launched in 2024, the new digital asset custody service will complement HSBC’s existing digital asset issuance platform, known as HSBC Orion, and its offering for tokenized physical gold, launched on Nov. 1, 2023. These combined services will form a comprehensive digital asset offering tailored for HSBC’s institutional clients, as stated by the firm.

HSBC’s Commitment to Digital Asset Markets

Highlighting the significance of these services, John O’Neill, HSBC’s global head of digital assets strategy, emphasized the bank’s dedication to the overall advancement of digital asset markets. The bank’s decision to venture into digital asset custody was a response to the escalating demand for custody and fund administration of digital assets from asset managers and owners. Zhu Kuang Lee, HSBC’s head of digital, data, and innovation, stressed the evolving nature of this market, emphasizing the pressing need for innovation within asset servicers.

Clarifying the Scope of the Custody Platform

Addressing any potential confusion, an HSBC spokesperson emphasized that the upcoming digital asset custody platform for institutional investors will exclusively cover security tokens and will not encompass cryptocurrencies like Bitcoin (BTC) and stablecoins such as Tether (USDT). They clarified that unlike a standard cryptocurrency, a tokenized security represents a digital version of a security issued and transferred on the blockchain.

HSBC’s Pursuit of Talent for Tokenized Security Division

HSBC’s venture into tokenized securities has been accompanied by an ongoing search for talent in its tokenized security division. In February 2022, the bank expressed a particular interest in recruiting individuals with expertise in digital assets, specifically asset tokenization and custody.

Previous Foray into the Blockchain and Crypto Industry

HSBC’s exploration of tokenized securities is not its first involvement in the blockchain and crypto industry. Notably, on Nov. 1, HSBC announced the successful testing of tokenized deposits through a partnership with the major Chinese financial services provider, Ant Group.

Conclusion

The collaboration between HSBC and Ripple’s Metaco to introduce security token custody reflects a pivotal advancement in the digital asset space. With increasing demand for institutional custody solutions, this move underscores HSBC’s commitment to innovation and expansion within the digital asset market.

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