The initiative was announced at Hong Kong FinTech Week on Nov. 2 as part of the city’s efforts to strengthen its position as an international gold trading and digital finance hub.
Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said the city planned to introduce digital tokens representing standard 400-ounce gold bars, each weighing approximately 12.4 kilograms, according to the South China Morning Post.
The tokens would use HAU, a gold price reference introduced in Hong Kong earlier this year, and support transactions between banks.
The project involves tokenization, which converts ownership rights or claims over physical assets into digital records that can be transferred and tracked using blockchain technology. Instead of physically moving gold whenever ownership changes, participating banks could transfer digital representations of the precious metal, potentially reducing transaction costs and settlement delays.
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Pile of gold bullion coins and bars. Photo from Unsplash |
The initiative will build on Project Ensemble, a program launched by the Hong Kong Monetary Authority (HKMA) in 2024 to explore blockchain-based assets and digital forms of money in financial transactions.
Meanwhile, financial institutions in Hong Kong have begun testing blockchain-based settlement systems for gold transactions. China CITIC Bank International and the Hong Kong Gold Exchange announced on Nov. 2 that they had completed a pilot using tokenized bank deposits to settle gold trades.
The tests covered transactions within the same bank and between different banks, with settlement completed in five minutes or less, compared with conventional arrangements that can take days, according to China Daily. The institutions aim to introduce the service commercially in 2027.
The HKMA also announced that it was advancing Project Ensemble into a new phase to support round-the-clock settlement of digital transactions, including cross-border payments.
Dan Khus, chief analyst at LVRG Research, said that that tokenizing gold bars could reduce settlement costs, improve trading efficiency and attract more institutional investors, strengthening Hong Kong’s position in the global gold market.
