HSBC launches Orion blockchain bond tokenization platform – Ledger Insights

Today HSBC announced plans to launch HSBC Orion, its DLT-based bond tokenization platform. It says the European Investment Bank (EIB) can use it to issue a GBP tokenized bond under Luxembourg law.

The solution enables tokenization of both the digital bond and the currency used for settlement, enabling atomic settlement or delivery against payment (DvP).

“Digital assets are a rapidly growing part of the financial markets. Our customers demand solutions that can deliver the benefits of tokenization in a trusted and secure environment, says John O’Neill, Global Head of Digital Asset Strategy, Markets & Securities Services, HBSC.

“We plan to use HSBC Orion to facilitate further digital bond issuance and expand its use to other products in 2023.” HSBC Securities Services plans to expand custody support for digital assets next year.

The digital bond initiative does not involve cryptocurrency, but instead uses a permissioned blockchain infrastructure. We have requested more details regarding the technology but have yet to receive a response in time for publication.

“Tokenization opens up opportunities for fixed income issuance, including faster processing and improved operational performance,” said Asif Sherani, CEO, Head of DCM Syndicate, EMEA. Efficiency using blockchain makes it cheaper to issue bonds, making smaller issues more viable. A shared ledger reduces the need for reconciliation.

HSBC has previously run blockchain binding trials. In 2020, it worked with the Singapore Marketnode tokenization platform to issue a S$400 million bond for agriculture firm Olam and is one of the launch partners for the Marketnode solution.

In late 2021, it conducted its experiments with the Banque de France using a central bank digital currency (CBDC) to settle digital bond transactions. This involved both the Hyperledger Fabric and R3 Corda enterprise blockchains, with IBM as a technology partner.

Separately, HSBC adopted DLT technology from Baton Systems for currency settlement. Initially, HSBC’s FX Everywhere was used between companies in the HSBC Group, and then it partnered with Wells Fargo to settle bilateral trades.

Meanwhile, bonds and debentures are one of the most popular asset classes for tokenization.

Last year, the EIB issued a 100 million euro bond on the public blockchain Ethereum. Yesterday, UBS issued a Swiss digital bond with a dual listing on both the SIX Digital Exchange (SDX) and SIX.

Switzerland, Luxembourg, France and Germany are the most favorable European destinations in terms of legal framework. Both the UK and the EU are launching DLT sandboxes to potentially update laws.