HSBC Puts $10B of Private Placements on R3’s Corda Blockchain

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. 

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. 

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.”