RegionsAsia PacificHSBC to explore DLT in Asia

HSBC to explore DLT in Asia

HSBC is to trial distributed ledger technology to streamline some of the challenges faced in the issuance and servicing of fixed income securities in Asia.

HSBC Singapore has announced a trial with Singapore Exchange (SGX) and Temasek that will explore the use of distributed ledger technology (DLT) for the issuance and servicing of fixed income securities. This will be the first such end-to-end digitalisation initiative focusing on Asia’s bond markets.

The trial will make use of tokenised securities and smart contracts over a permissioned ledger. The aim is to streamline these workflows and reduce process friction, lowering costs for issuers, investors, bond arrangers and custodians.

Though the region’s fixed income markets continues to see rapid growth, HSBC said bond issuance and servicing processes remain inefficient due to the absence of a single platform for information exchange between multiple parties, and tracking of a bond throughout its life cycle.

Tony Cripps, Chief Executive Officer at HSBC Singapore, commented: “The potential of DLT is an evolving story, and its role in overcoming inefficiencies in the fixed income market is yet to be seen. Only by collaborating with market participants will we fully understand its actual viability; by partnering with SGX and Temasek, we hope to explore whether digital assets could become a reality.”

Solving longstanding challenges

SGX is Asia’s leading and trusted market infrastructure, operating equity, fixed income and derivatives markets to the highest regulatory standards. Lee Beng Hong, Head of Fixed Income, Currencies & Commodities at SGX, added: “As Asia’s largest listing venue for bond issuers globally, we are excited to collaborate on a new operating model that could potentially bring cost savings to issuers, arrangers and investors. Having HSBC and Temasek on board will enable us to evaluate holistically whether smart contracts and DLT can solve some of the long-standing challenges in the fixed income issuance ecosystem.”

Headquartered in Singapore, Temasek is an investment company having offices in Beijing, Hanoi, Mumbai, Shanghai and Singapore in Asia.

Chia Song Hwee, President & Chief Operating Officer at Temasek, said: “Blockchain technology has great potential in transforming businesses and opening up new opportunities. We are pleased to partner with HSBC and SGX on this test-bed, with an eye on how the technology can potentially be applied more broadly across a range of products. Such partnerships and initiatives allow us to advance the impact of emerging technologies and better understand how economies can benefit.”

Last month, HSBC and SWIFT defined industry standards for APIs in Hong Kong, re-using ISO 20022 components. The initiative saw the Hong Kong banking community working together to review and agree on this standard.

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