On November 29, 2019, global banking conglomerate HSBC Holdings announced it is doubling down on its use of blockchain solutions, by planning to shift $20 billion worth of assets into a new blockchain-based custody platform in March 2020.
Reuters conveyed that the blockchain-based platform, known as ‘Digital Vault’ aims to give investors real-time access to records of securities bought on private markets.
The records are currently held on paper, making them time-consuming and expensive to access, with numerous intermediaries required to process paperwork and oversee transactions.
Under the first rollout, HSBC will transfer 40% of its records onto the new platform. If the process is successful, the bank may likely follow with it’s remaining $50 billion in assets.
Using a blockchain-based platform to manage assets is meant to save time and money, but HSBC said it could not currently quantify the actual amount that will be saved for the bank or its customers by the platform.
Windsor Holden, a consultant who tracks cryptocurrencies, told reporters that major savings were unlikely in the early stages of the new platform.
Holden was quoted as saying:
“I wouldn’t expect to see huge savings or huge efficiencies announced in the first year to 18 months.”
The argument that there are no “real-world” success cases or practical uses for blockchain platforms continues to be refuted, with HSBC Bank now leading the way.
HSBC Using Blockchain for Better Efficiency
HSBC’s new platform will help in the digitized recording of paper-based private placements, via the brilliance of blockchain tech.
The demand for private placements has been on the rise in recent times, and HSBC believes that by 2022, the value of private placements globally would reach the mark of about $7.7 trillion, accounting for a rise of 60% in the past five years span. The bank expects to witness a surge of 20% in the allocations by asset manager clients over the same period.
The head of HSBC’s securities services, Ciaran Roddy, remarked that the interest in private placements from insurers is growing at a fast pace in the U.K, the U.S, and in Asia and the Middle East.
Banking on Blockchain
The news of HSBC adopting blockchain comes ahead of an anticipated shake-up of the institution’s international banking and markets division, with interim CEO Noel Quinn looking to cut costs and improve returns within the enterprise.
Earlier this year, news reports revealed that the bank had processed over 3 million foreign exchange transactions using blockchain.