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HSBC’s digital assets platform, HSBC Orion, has received regulatory approval from the Bank of England to operate in the UK’s Digital Securities Sandbox (DSS). The approval allows HSBC to act as a Digital Securities Depository (DSD) and issue, service, and settle digitally native bonds.
This includes corporate bonds of up to £900 million and the UK’s upcoming digital gilt instrument (DIGIT), a type of blockchain-based government bond.
The Bank of England states that HSBC has “passed Gate 2” of the DSS and been granted the ability to engage in live activities. Patrick George, global head of markets and securities services at HSBC, says the approval will enable the bank to participate in the inaugural DIGIT pilot issuance.
The DIGIT pilot issuance is expected to take place by Q1 2027, according to the UK Chancellor of the Exchequer. The DSS is a regulated environment that lets institutions test and implement new technologies, including distributed ledger technology (DLT).
The DSS involves participants graduating through multiple stages, with each stage enabling the participant to engage in more activity. There are four stages, or “gates”, with Gate 2 signifying approval for live activities and Gate 3 granting authorization to increase limits and scale up activity.
HSBC has also signed a memorandum of understanding with the London Stock Exchange Group (LSEG) to deliver a bilateral Digital Securities Depository link. This link is intended to provide connectivity between HSBC Orion DSD and LSEG’s DSD and further deliver on the government’s design ambition to support interoperability, including enabling digital securities to be issued and settled efficiently.
In practice, this development means that HSBC will be able to provide more efficient and secure services to its clients, which could lead to increased adoption of digital securities in the UK. They will be able to issue and settle digitally native bonds, providing more opportunities for investors to participate in the digital securities market.
The partnership between HSBC and LSEG is expected to strengthen the bank’s position in the digital securities sphere. It will enable HSBC Orion to act as an issuer DSD and LSEG’s DSD to act as an investor DSD for settlement and asset servicing.
The UK government has stated that the link is intended to provide connectivity between the two DSDs and further deliver on the government’s design ambition to support interoperability. HSBC’s position in the market is strengthened by this partnership.
They will provide more opportunities for investors.
