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HSBC Takes Stab at Using Blockchain To Modernize London's Antiquated Gold Market (bloomberg.com) 39

Posted by msmash from the how-about-that dept.
One of the world's top bullion banks is bringing blockchain to the antiquated London gold market. From a report: HSBC has launched a platform that uses distributed ledger technology to tokenize ownership of physical gold held in its London vault, Mark Williamson, global head of FX and commodities partnerships and propositions, said in an interview. The new system creates digital tokens that represent gold bars, which can then be traded through the bank's single-dealer platform. [...] What sets HSBC apart is its clout in the bullion market. It is one of the world's largest custodians of precious metals and one of four clearers on the London gold market, where over $30 billion of the metal changes hands every day.

Around 698,000 gold bars are stored in vaults in the Greater London area, valued at around $525 billion, according to the London Bullion Market Association. Despite its vast size, London's gold market still relies heavily on manual record keeping and trades entirely over-the-counter. Using blockchain technology makes the process "quicker and less cumbersome" as clients can more easily track the gold they own through the platform, down to the serial number of each bar, Williamson said. HSBC plans to eventually expand its system to include other precious metals, he added.
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HSBC Takes Stab at Using Blockchain To Modernize London's Antiquated Gold Market More

HSBC Takes Stab at Using Blockchain To Modernize London's Antiquated Gold Market

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  • Comment removed (Score:3, Informative)

    by account_deleted ( 4530225 ) on Wednesday November 01, 2023 @11:57AM (#63971994)
    Comment removed based on user account deletion

    • If you use a blockchain, the stupid investors get erections.

      • Na, OP is right. Blockchain is so yesterday, the new thing to make VC panties wet is AI.

        • Na, OP is right. Blockchain is so yesterday, the new thing to make VC panties wet is AI.

          I have a high degree of certainty that we'll get a "correction" to this announcement in a few days where somebody says, "What we meant was AI, not blockchain. Clearly, our tech people gave us the wrong terminology. Fear not. They'll be sacked and we'll hire foreigners to take over for them at our earliest convenience for this indiscretion. And our AI will have unicorns and lollipops for everyone! Isn't it delightful!"

        • Re:bit late (Score:4, Funny)

          by TheMiddleRoad ( 1153113 ) on Wednesday November 01, 2023 @01:57PM (#63972234)

          I shall run my AI on blockchain! Then my AI shall create better blockchain, and then I shall have blockchAIn.

          • If you're not using stable diffusion to create new entries on the bored ape yacht club chain, are you really maximizing investor frenzy?

            I mean, come on, gold, like the cave men used?!!!

    • im not sure what problem it actually fixes, they already had this info on a system. now they want to move it to a distributed database....why?

      Mom's medical testing facility recently had a total data loss situation. They can't even notify those they lost the tests for because they even lost the customer lists, appointments, as well as the test results. I'm not sure whether or not it was from a ransomware attack, and it was apparently confined to mom's facility, not all the facilities of that company.

      But that sounds like a reasonable reason for a distributed database, along with good backups. Apparently even the backups were lost for this facili

      • What exactly would the blockchain solve here? Nothing. They'd just be asking people to somehow backup all the corporate data for them. What you wrote makes no sense at all.

        • Note that the title of my post is "Why a distributed database" not "Why blockchain".

          If you reread it fixing that little misunderstanding, it'll probably make a lot more sense to you.

          The idea is that if you have a properly distributed database, no single point of failure can wipe out the records.

          • You're going to distribute a database that is, I assume with the images, many terabytes and needs to be locked down for privacy laws? Blockchain or some other form of encryption, no.

            With a competent form of backup, no single point of failure will wipe out the records. You think somebody who already cannot design a proper backed up system is going to manage a distributed database somehow better? What?

            • You're going to distribute a database that is, I assume with the images, many terabytes and needs to be locked down for privacy laws? Blockchain or some other form of encryption, no.

              You're conflating two different scenarios, though I'll admit that I didn't separate them enough:
              1. Medical testing: A distributed database, with proper security, makes sense, due to the loss of data her lab experienced. Something to prevent.
              "Many terabytes" being a problem? I think that you over-estimate the size requirements for most tests. Most tests aren't x-rays, MRIs, sonograms, and such.
              Now yes, over time it might add up to terabytes, but a 2TB NVMe SSD is under $100 these days. And 4TB versions

    • If the system is correctly designed, it will prevent double allocation and double spending of finite items

      That would be a good thing

  • There's no point using a block chain to represent physical objects. By the time you have a physical entity managing the said objects, you're better off using a more efficient distributed database. What happens if someone steals a given piece of gold for example? How do you update the blockchain to reflect that? There are many other ways in which the database could become corrupted and no longer correctly represent the physical reality of the gold store. You don't need a (somehat) slow, power hungry, decen

    • Disclaimer: I only read the summary and not TFA - and no nothing about this project. It just looks like the usual buzzword publicity to me.

      And it shows because your comment shows absolutely no appreciation for the issues the industry faces.

      The whole point of using a private blockchain is because you need a global (at least among participating entities) record of truth. A centralized database in the hands of one party is not that.

      Why do you need this? Similar reason to stocks getting tokenized. The existing

      • None of this requires blockchain, all you need is a database that is readable publicly, anyone who is interested can keep a copy, each transaction can be signed with with a digital signature. No need massive distribution or 3rd parties to process the transaction, with insane overheads like proof of work. You still need to trust HSBC because if they let people take the physical gold what are you going to do? Sue them? Well you can do that with pieces of paper with signatures on it.

      • Re: (Score:2)

        by DarkOx ( 621550 )

        It also has the possibility to allow things to be undetected entirely.

        You need to have an iron clad method of ensuring what is in the vault looks just exactly like what is on the block chain or else.

        Yes you can serialize the bars; but if you melt it down the serial numbers tend to vanish. The block chain won't prevent lapping type schemes where the same inventory is placed on the ledger in multiple places.

        I can't read the paywalled article and did not bother looking for a way around; but its hard to imagin

      • Re:Yes there is... (Score:5, Insightful)

        by Smidge204 ( 605297 ) on Wednesday November 01, 2023 @12:54PM (#63972114) Journal

        > The whole point of using a private blockchain is because you need a global (at least among participating entities) record of truth. A centralized database in the hands of one party is not that.

        What HSBC appears to be implementing is also not that. There doesn't seem to be anything to suggest the system is decentralized at all... in fact the summary even says the tokens will be "traded through the bank's single-dealer platform."

        > The existing system makes it easier (much easier) to engage in fraud (most notoriously naked short selling) because you don't have an authoritative record of truth above all of the participating entities

        The kind of fraud most prevalent is not hindered in the slightest by blockchain. The idea that someone hacks into your database and changes values is comical... what happens is a scammer tricks you into giving them your money directly or enough of your credentials to gain access to your account. Blockchain can't do jack shit about this because from the system's perspective the transactions are indistinguishable from legitimate ones.

        But blockchain DOES make it essentially impossible to undo that transaction once it's discovered to have been fraudulent, so there's that I guess?

        > move asset claims faster and cheaper

        Only because, apparently, their current system is antiquated hard copy paperwork and in-person dealings... you know what would be even more of an improvement than blockchain? Literally any other digital management system other than blockchain.
        =Smidge=

  • Why do I know the answer is "somethingsomething blockchain, somethingsomething profit"?

  • JP Morgan rules COMEX and the LBMA gold clearing process. They just paid the largest fines in CFTC history [reuters.com] for manipulating the price of gold using a technique known as "spoofing". This is where someone pretends to want a huge order of physical gold. This temporarily increases the price and allows metals traders to create artificial profits via timing their speculation. This and other techniques have been used to keep the gold price from exploding (after all, fake paper-gold is easy to create and spoof with
  • the same ingot has been sold to 6,000 different 'owners'.

  • Something about vast quantities of wealth lying around seems to make people dumber than a bag of rocks.

  • Arsehat C' levels have had "blockchain!!" thrown at them for years. Let a few application attempts beyond crypto fail spectacularly and we'll finally see this nonsense put to bed.
  • Nobody who understands technology is in senior management. https://www.hsbc.com/who-we-ar... [hsbc.com]
    It's all finance, marketing, and HR asshats.
    They're going to pay for this mistake.
  • If you don't hold it, you don't own it. 6000+ years of financial history has shown that banks and other financial groups can't be trusted to hold gold for you.
  • I'm absolutely sure they're just trying to increase profits by improving efficiency and that there is no ulterior motive or underlying scheme to extract even more money from the banking system to line their own profits. Right, guys?

  • There's only one difference between all tupes of Databases and blockchain - it does not need a central authority. Like a bank or Fin Co is needed for payment transactions between users. And then another settlement body is needed to settle across the banks and across countries or networks too sometimes.
    In theory these are infallible, unbiased, apolitical etc etc but in practice they fall short sometimes.

    Blockchain is a way to essentially remove the need for such a central authority and replace it with what c

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