Hang Seng and HSBC team up for gold on the blockchain! Hong Kong's 2,000-ton reserve to be on-chain for financial applications

Hong Kong Hang Seng Investment announced on Monday that its Gold ETF will issue tokenized fund units based on Ethereum, with HSBC serving as the tokenization agent. This marks the transition of Hong Kong’s RWA strategy from concept to implementation. Deputy Financial Secretary Wong Wai-lun revealed that Hong Kong aims to expand gold reserves to 2,000 tons within three years and establish a central clearing system, inviting the Shanghai Gold Exchange to participate, building a complete on-chain financial ecosystem.

Structural Innovation: Tokenized Fund Units Instead of On-Chain Mapping

The highlight of the Hang Seng Gold ETF is that it does not simply map traditional ETF shares onto the blockchain but issues tokenized fund units directly on the blockchain from the outset. This structural design represents a significant advancement in asset tokenization, elevating blockchain from a display layer to an actual issuance and circulation layer.

The specific operation model includes three core elements. First, investors can subscribe or redeem fund units in the form of tokens through qualified distributors. This means that tokens are not just digital certificates but have full legal standing as fund shares, with holders enjoying the same rights and protections as traditional ETF investors. Second, HSBC acts as the tokenization agent, responsible for establishing links between the traditional financial system and the blockchain, ensuring that issuance, redemption, and custody of tokens comply with regulatory requirements. Third, the initial deployment is on the Ethereum network, with future support for migration to other public blockchains, leaving room for multi-chain expansion.

This “native issuance” model, rather than “post-mapping,” offers multiple advantages. Traditional mapping involves issuing ETF shares in the conventional system and then packaging some shares into tokens, which can lead to double accounting, liquidity fragmentation, and regulatory gray areas. In contrast, the native tokenization approach designs fund units as blockchain-native assets from the start, avoiding these complexities.

From an investor perspective, holding tokenized Hang Seng Gold ETF units means enjoying all the benefits of blockchain: 24/7 trading, real-time settlement, programmability, and cross-border accessibility. Meanwhile, since the tokens are backed by physical gold and regulated by Hong Kong financial authorities, investors also gain the security of traditional financial products. This “best of both worlds” design is precisely the ideal state sought in the RWA track.

HSBC’s role as the tokenization agent is especially critical. As one of the world’s largest precious metals banks, HSBC is responsible for setting the daily price benchmark for the London Bullion Market Association (LBMA), possessing unmatched expertise and infrastructure in the global gold market. HSBC’s involvement not only provides technical and operational support but also offers institutional credibility for the tokenized gold ETF. When traditional financial giants are willing to undertake the role of tokenization agent, it sends a clear signal to the market: blockchain technology has matured enough to support mainstream financial products.

Key Elements of Hang Seng Gold ETF Tokenization

Issuance Model: Blockchain-native tokenized fund units, not post-mapped

Technical Foundation: Initially deployed on Ethereum, future multi-chain support

Tokenization Agent: HSBC, providing institutional-grade professional services

Legal Status: Tokens are official fund shares with full investor rights

Trading Method: Subscription and redemption through qualified distributors

Hong Kong’s Three Major Infrastructure Developments for On-Chain Finance

The tokenization of the Hang Seng Gold ETF is a landmark event in Hong Kong’s transition from conceptual validation to commercial implementation of its RWA strategy. From policy to assets, from clearing to settlement, Hong Kong is simultaneously advancing three key infrastructure routes to build a complete on-chain financial ecosystem.

The first layer is the monetary layer: stablecoins will be officially integrated into the system. Financial Secretary Paul Chan confirmed that Hong Kong plans to issue a stablecoin license later this year, based on the principles of “same activity, same risk, same regulation.” This means stablecoins will enter a regulated payment and settlement layer, becoming the liquidity foundation of the on-chain financial system. After the ETF tokenization, investors can use regulated stablecoins for subscription and redemption without converting back to fiat currency for each transaction.

The second layer is the asset layer: real-world assets are being systematically tokenized. Hong Kong has issued three batches of tokenized green bonds totaling approximately $2.1 billion USD, issued by the Hong Kong government, representing official recognition of tokenization technology. The Hang Seng Gold ETF is the first large-scale, mass-market tokenized fund sample. This combination demonstrates that Hong Kong’s tokenization strategy covers multiple asset classes, including fixed income (bonds), commodities (gold), and potentially expanding to real estate, equities, and other financial products.

The third layer is the clearing layer: establishing a bridge between on-chain and off-chain. Deputy Financial Secretary Wong Wai-lun revealed that Hong Kong is actively expanding its gold storage capacity, aiming to increase to 2,000 tons within three years, and is building a gold central clearing system, inviting the Shanghai Gold Exchange to participate, with operations expected to start within this year. This clearing system will serve as a conversion bridge between physical gold and on-chain gold tokens, ensuring token holders can exchange for physical gold when needed.

This three-layer infrastructure forms a complete on-chain financial ecosystem: physical assets like gold are tokenized on the blockchain, stablecoins facilitate settlement, and the central clearing system provides an interface with traditional finance. When these three elements operate together, Hong Kong will have a fully functional, regulated on-chain financial market.

Why Choose Gold as the RWA Trump Card?

Hong Kong’s choice of gold as its RWA strategy “trump card” is not accidental but based on gold’s unique asset properties. Gold is the quintessential asset class: a store of value, a financial hedge, and a national strategic asset. These three attributes make it an ideal candidate for testing tokenization technology.

As a store of value, gold has millennia of proven history. Unlike fiat currencies, gold does not depreciate due to government policies; its value is determined by market supply and demand and physical scarcity. When this ultimate store of value is combined with blockchain’s permanent record features, it creates an unprecedented digital form of gold that retains the value attributes of physical gold while gaining the convenience of blockchain.

As a financial hedge, gold performs especially well during periods of economic uncertainty. When stock markets decline, inflation rises, or geopolitical tensions increase, investors traditionally increase their holdings of gold. Tokenized gold ETFs make this hedging operation more convenient, allowing investors to transfer funds into gold within minutes without experiencing the T+2 settlement cycle of traditional gold ETFs.

As a national strategic asset, gold reserves symbolize sovereign wealth and financial stability. Hong Kong plans to increase its gold storage capacity to 2,000 tons within three years, a scale comparable to many medium-sized countries’ gold reserves. Coupled with tokenization technology, Hong Kong is not only accumulating physical gold but also establishing a global gold trading and clearing platform, aiming to redefine the operation of the gold market in the digital age.

When the “most conservative asset” chooses the “most advanced ledger system,” it clearly indicates one thing: blockchain is no longer just serving high-risk assets but is beginning to anchor the core value of the financial system. This shift in positioning has profound implications for the entire cryptocurrency industry, eliminating the stereotype that “blockchain is only suitable for speculative assets” and demonstrating that the technology can support the most serious financial applications.

$2.1 Billion Green Bonds and Shanghai Gold Exchange Collaboration

The Hang Seng Gold ETF is not the starting point of Hong Kong’s tokenization experiments. Prior to this, Hong Kong issued three batches of tokenized green bonds totaling approximately $2.1 billion USD. These bonds, issued by the Hong Kong government, fund environmentally friendly projects and represent official support for tokenization technology. The tokenization of government bonds has a demonstrative effect, proving to the market that blockchain technology meets the rigorous standards of sovereign debt issuance.

More notably, Hong Kong is collaborating with the Shanghai Gold Exchange. As one of the world’s largest physical gold trading markets, with annual trading volumes in the tens of thousands of tons, the Shanghai Gold Exchange’s participation in Hong Kong’s central gold clearing system, targeted to be operational within this year, hints at a broader vision: connecting China’s domestic and international gold markets via blockchain.

This cooperation has deep geopolitical and economic significance. China is the world’s largest gold producer and consumer, but has long lacked sufficient influence in international gold pricing, which remains dominated by London and New York markets. By establishing a blockchain-based gold clearing system, Hong Kong and Shanghai have the opportunity to create an alternative gold market infrastructure, challenging Western-dominated traditional systems.

Currently, from policy to assets, from clearing to settlement, a complete on-chain financial ecosystem is taking shape. Gold is issued on the blockchain via tokenization, stablecoins serve as settlement media, and the central clearing system provides a bridge to traditional finance. This three-layer architecture is not only applicable to gold but can be replicated for other asset classes, including stocks, bonds, real estate, and art.

Hong Kong is not only “embracing Web3” but also “redefining its status as an international financial center.” From the anticipation of a stablecoin license, to the construction of a gold clearing system, to the issuance of tokenized green bonds, the tokenization of the Hang Seng Gold ETF exemplifies Hong Kong’s role as a “super connector” in the Web3 era. It links traditional trillion-dollar assets with cutting-edge blockchain technology, setting a new benchmark for the future of global finance.