The bank is using blockchain as opposed to a traditional database because it plans to tokenize the private placements after it digitizes them. Private placements are sales of stock shares or bonds that don’t occur on the open market.
HSBC has put $10 billion of paper-based private placement records on R3’s Corda blockchain and plans to ramp up the project through this year and next.
“We’re confident that we’ll be able to put significant additional volume and value of private placements from new and existing clients on the platform over the next 12 to 18 months”, said Ciaran Roddy, head of custody innovation and strategy initiatives at HSBC.
With no immediate plans to move into the crypto space, HSBC is focused on assets that have yet to be digitized as well as exchange-based security tokens and traditional assets that could be fractionalized. The bank is also seeing demand from clients to use tokens for a whole fund lifecycle, Roddy said, as well as tokens that are a basket of assets wrapped into one.
Unlike other enterprise efforts, HSBC did not put a cost-savings estimate on the digitization project, claiming “incremental internal efficiency” instead. However, Roddy said the bank’s main aim with Corda is to get real-time information access.
“It’s more of a case of us trying to future-proof ourselves as blockchain becomes more mainstream and then also being in a position to add value to clients by providing them with self-service tools instead of them having to come to us to source the information”, he said.
The queries are usually simple, but while records are on paper, clients have to call bankers who then look up the answers to those queries. While tokenization would allow for the bank to implement tools like smart contracts, the bank first has to get issuers on board with the idea and ensure that regulators are comfortable with recognizing tokens as legal, enforceable and transferable assets.
Clients can access the Corda platform, which the bank has dubbed “Digital Vault”, through their HSBC online accounts.
“They click on holdings and it brings up a list of all of the documents that we have stored against that particular transaction”, Roddy said.
Clients can also grant system access to third parties like regulators and auditors. Some clients have already granted system access to their asset managers.
The bank is trying to anticipate a world in which financial entities turn to tokens as a better way of issuing assets, Roddy said.
“We’re seeing a number of traditional exchanges use DLT”, he said. “HSBC being a clearing member and a local depository, we want to be able to support our clients who want to transact in these token markets.”
Hyperledger to Explore How Blockchain Can Help World Meet Climate Goals
Hyperledger has announced a new working group at Davos that will explore how blockchain can help the world meet climate goals set out in the Paris Agreement.The enterprise blockchain consortium launched the Hyperledger Climate Action and Accounting Special Interest Group (SIG) during the World Economic Forum (WEF) Annual Meeting. Said to be the first of its kind, the Climate SIG will enable participants to share ideas and findings on how distributed ledgers can help governments and companies coordinate on reducing global emissions.
«DLTs are central to the creation of a global and open climate accounting system that helps integrate all actors and actions under the same planetary goal,» according to Hyperledger’s website.
The technology may become a transparent global database to track emissions, identify problem areas and coordinate solutions, helping the world meet the Paris Agreement’s goal for preventing increases in global average temperatures rising 2°C above the pre-industrial average.
Group participants will consider how Hyperledger’s blockchain can become an open climate project. Members will develop the mechanisms required to enable trustless emissions and climate statistics reporting, and will create the protocols and standards suitable for companies and governments around the world.
«Innovation and the real-world impact of enterprise blockchain are top of mind for us», said Hyperledger’s executive director, Brian Behlendorf. Initiatives like Climate SIG, he added, will improve understanding for the technology’s use cases and broader potential.
Hyperledger also welcomed six new members to its enterprise consortium, including the digital business consulting firm Cognizant and the University of Hong Kong.
«By joining the Linux Foundation and Hyperledger, Cognizant will be working with several notable organizations to advance the Blockchain and DLT ecosystems for users around the globe,» said Lata Varghese, Cognizant’s vice president for blockchain and DLT.
Some entities have already recognized blockchain’s potential for addressing environmental challenges. For example, IBM has been working on a blockchain-based groundwater-management solution in California, while a 2018 WEF study identified 68 different ways DLT could address issues surrounding supply-chain sustainability and resource management.
