HSBC is set to unveil a new blockchain-based custody platform named Digital Vault that will be used to manage assets worth $20 billion. This move will mark a radical shift in the bank’s practices as they swap paper for the distributed digital ledger.
The Digital Vault platform will give investors real-time access to their accounts and records of securities bought on the private markets. This deployment is an opportune time as the bank seeks to capitalize on the growing interest among yield-chasing investors in such assets.
Currently, all private placements at HSBC are paper-based and without standardization making access cumbersome and time consuming. This is further complicated by the huge volume of assets managed by HSBC, currently up to $50 billion.
The blockchain-based HSBC platform will digitize all paper records of their customers’ private placements. This is aimed at saving their investors time for basic tasks such as making checks or checking balances among others.
Despite these perceived benefits, the transformational effect of the swap is not quite clear yet. HSBC has not yet been able to quantify the bank’s projected cost savings or those of its clients resulting from the shift to the blockchain-based platform.
However, this is not standing in the way of HSBC as it expects global private placements to grow substantially to around $7.7 trillion by 2022 signifying a 60% growth within 5 years.
Ciaran Roddy, the head of custody innovation at HSBC’s securities services arm, affirmed this position saying:
With some of the yields that are on offer, we are definitely seeing an increase in demand
The bank also expects its asset management allocation to grow from 9% to 20% within the same period. With such positive projections, the shift to the blockchain based platform makes sense as the cost savings and improved efficiencies will be amplified by the large volumes and expansive client base.
HSBC appear to be playing the long game with plans already in place to guide the process. It begins with an imminent reorganization of its global banking and markets division geared towards lowering costs and improving returns. This means even though major savings are unlikely in the initial stages of the project deployment, the Digital Vault could serve as a precursor for long term profitability and efficiency driver for HSBC.
The swap by the banking behemoth is set to become one of the biggest deployment yet for the relatively new blockchain technology. As such, it bears all the hallmarks of a historic moment that could usher new possibilities for the blockchain space.