Shanghai-Hong Kong Cooperation Precious Metals Settlement System: An Important Strategic Layout for Digital Financial Development in Hong Kong, China

Authored by: Zhang Feng

Recently, the Hong Kong Financial Services and the Treasury Bureau (Treasury Bureau) and the Shanghai Gold Exchange officially signed a cooperation agreement, marking a new phase in the collaboration between the gold markets of Shanghai and Hong Kong. This not only upgrades traditional financial infrastructure but is also regarded as an important strategic layout for Hong Kong’s digital financial development. The cooperation centers on jointly building the Hong Kong Gold Central Clearing System, aiming to promote interconnection between the two markets and create an integrated gold ecosystem.

1. Purpose, Measures, and Vision of Cooperation

Main Purpose. This cooperation aims to facilitate the coordinated development of Hong Kong and Shanghai as international financial centers and key gold markets, representing a critical step in Hong Kong’s construction of an “International Gold Trading Center.” By connecting with the mature experience and infrastructure of the Shanghai Gold Exchange, Hong Kong hopes to rapidly enhance its capabilities in gold trading, clearing, and storage, while leveraging the linkage between Shanghai and Hong Kong to attract international participants and build a cross-regional gold circulation system.

Main Measures. The cooperation focuses on two major areas: first, establishing a high-level governance framework by creating the Hong Kong Precious Metals Central Clearing System Limited, wholly owned by the SAR government, with Secretary for Financial Services and the Treasury Xu Zhengyu serving as Chairman of the Board, and a representative from the Shanghai Gold Exchange as Vice Chairman. The Shanghai Gold Exchange will deeply participate in system preparation, rule-making, institutional recognition, and risk management, promoting efficiency and internationalization of the clearing platform. Second, connecting physical assets and markets by leveraging the physical storage management system of the Shanghai Gold Exchange to explore providing gold storage services for local and international participants in Hong Kong; simultaneously advancing the interconnection mechanism of gold markets in both regions to build an “integrated, efficient, open gold ecosystem.”

Goals and Vision. The short-term goal is to pilot the Hong Kong Gold Central Clearing System by 2026 and promote the inclusion of precious metals in Hong Kong’s fund and single-family office tax incentives. The medium to long-term vision is to establish a dual-core international gold trading system driven by Shanghai and Hong Kong, enabling smooth transfer of physical gold and financial products, and enhancing China’s influence in global gold pricing.

2. Impact on Hong Kong’s Digital Financial Infrastructure

The establishment of the Gold Central Clearing System essentially represents a digital and modern upgrade of financial infrastructure. Although gold itself is a traditional physical asset, its entire trading, clearing, storage, and derivatives issuance processes are increasingly digitized, becoming a vital part of digital financial infrastructure.

Firstly, the system will promote digitalization of settlement and custody. By integrating with the Shanghai Gold Exchange’s system, Hong Kong can introduce mature mainland digital storage management and clearing technologies, enabling real-time rights confirmation, traceable transactions, and automated settlement of gold assets. This not only improves efficiency but also lays the groundwork for future tokenization of gold assets (such as gold stablecoins and digital gold certificates).

Secondly, the system will strengthen Hong Kong’s digital connectivity as an international financial hub. Emphasizing “alignment with international standards,” the system will be compatible with mainstream international clearing protocols and data standards, facilitating cross-border gold transactions and settlements. In the era of digital finance, such connectivity infrastructure is key to attracting global capital and technology firms.

Finally, the system can serve as a model for integrating digital finance with the real economy. By combining physical gold storage with digital trading, it explores an integrated digital management mode of “physical asset—information flow—fund flow,” providing a reference for the digital trading of other commodities, artworks, and physical assets.

3. Impact on Digital Asset Issuance and Trading

Gold, as a physically recognized asset with universal value, combined with digital finance, will open new pathways for “asset tokenization.”

On one hand, the system provides a trusted underlying for gold-related digital assets. Recently, Hong Kong has listed gold funds, which rely on local gold infrastructure for physical gold trading and storage. In the future, based on the same infrastructure, digital assets anchored to gold (such as gold tokens) can be issued and traded on compliant platforms. These backed-by-physical assets will gain greater trust from institutions and high-net-worth investors.

On the other hand, the cooperation will promote diversification of the digital asset trading ecosystem. Traditional financial products like gold derivatives, gold ETFs, and gold futures can gradually evolve toward digitalization, fragmentation, and cross-border trading. The interconnection between Shanghai and Hong Kong will also help form cross-border digital gold trading markets, improve liquidity, and attract more digital asset issuers and trading platforms to Hong Kong.

This cooperation will substantially advance the tokenization of Shanghai-Hong Kong assets, creating a replicable “physical asset + digital rights” model. Gold, as a high-value, easily stored physical asset, with standardized and interconnected clearing and storage systems, provides a credible underlying asset digitalization template for both regions, which can be extended directly to the tokenization of other commodities, luxury goods, and even real estate.

For Hong Kong, this system enhances its credibility as an international asset tokenization hub, attracting more issuers and investors to participate in the issuance of digital assets backed by physical assets. For Mainland China, leveraging Hong Kong’s common law system and international capital channels allows for cautious pilot programs of cross-border digital asset circulation and expanding offshore applications of RMB-denominated digital assets.

In the long run, the mutual recognition of technology, regulatory cooperation, and cross-border clearing standards formed through this gold cooperation will lower institutional and operational barriers for broader asset tokenization businesses, accelerating the development of cross-regional digital asset markets.

Therefore, this clearing system may expand to other precious metals and commodities in the future, forming a multi-asset digital trading ecosystem, further enriching Hong Kong’s digital asset market structure and depth.

4. Impact on Global Rules Leadership in Digital Finance

The cooperation between Hong Kong and Shanghai is not only about market and technological integration but also about the collaborative development of rules and standards. In digital finance, rule-making authority often depends on the design and governance of core infrastructure.

In this cooperation, the Shanghai Gold Exchange’s participation in rule-setting and risk management for Hong Kong’s clearing system indicates that both regions will gradually align in areas such as gold trading, clearing, and data standards. If successful, this could lead to a set of gold digital trading standards that integrate Chinese practices with international norms, serving as a model for other digital asset categories.

Moreover, Hong Kong, with its common law system and internationally aligned regulatory environment, has the opportunity to promote these standards globally. Especially as digital asset regulation becomes an international focus, Hong Kong could lead or participate in establishing international rules for digital bulk commodity trading, significantly enhancing its influence in global digital financial governance.

In the long term, this “Mainland practical experience + Hong Kong international platform” cooperation model could serve as a springboard for China to participate in and even lead international rules for digital finance, particularly in key areas like digital currencies, digital securities, and cross-border payments.

5. Injecting the “Golden Spirit” into Hong Kong’s Digital Finance

The Shanghai-Hong Kong gold cooperation is more than just building a clearing system. It injects a “Golden Spirit” into Hong Kong’s digital finance landscape—an integration of physical and digital, connecting Mainland China and the global market. Through gold, an ancient and universal asset class, Hong Kong is exploring a path of financial upgrading rooted in tangible value while embracing digital innovation.

In the future, as the pilot of the Gold Central Clearing System and related tax reforms are implemented, Hong Kong is expected to attract more institutional investors, tech companies, and digital asset issuers. The deep collaboration between Shanghai and Hong Kong will also provide an important leverage point for China in the global digital financial competition.