Paving the way for institutional entry
07 July 2025
As digital assets become mainstream components of institutional portfolios, investors will expect the transformative benefits of these new assets to come with the same levels of trust they have in traditional assets. HSBC’s Fiona Horsewill, global head of Securities Services and Sean Mullins, global head of Digital Assets Product, explore
Image: stock.adobe.com/kulup
After more than a decade of vigorous experimentation at the fringes of the financial system, digital assets are now a mainstream component of institutional investment portfolios. It is a momentous shift that looks set to revolutionise global finance, by reshaping infrastructure and regulations to deliver new levels of market efficiency.
There is clearly strong demand. One survey conducted in 2025, found that 86 per cent of institutional investors had exposure to digital assets or planned to make allocations to the asset class over the course of the year.
And data from another broad survey of investors, banks, and brokers showed that 36 per cent of industry participants are already live with distributed ledger technology (DLT) — the technology that enables digital assets.
The most commonly cited reason driving these projects was the prospect of new product revenues, suggesting that financial institutions see being part of this emerging ecosystem as a major component of future business growth.
“In many ways, the future of finance is already here,” said Fiona Horsewill, global head of Securities Services, HSBC. “The rapid adoption of digital assets among institutional investors is leading to change along the entire value chain, with the potential to reorder the market infrastructure that has defined global finance for generations.”
The next wave of digitisation
The scale of upcoming change can be compared with the move away from paper-based systems towards digitisation that took place in the last half of the 20th century — a multi-decade process that replaced a wide range of manual processes with more efficient digital alternatives. Physical certificates became computerised records, trade settlement was automated, and trading floors were replaced by electronic trading platforms.
What we are seeing today is the next wave of digitisation, as the adoption of DLT by financial institutions has the potential to unlock further efficiency benefits. These include: instant settlement, greater automation from smart contracts, and enhanced liquidity due to 24/7 trading.
But we are still at the early stages of what will be a long-term transition, as demonstrated by the current level of progress in tokenisation — the process by which securities are added to a programmable ledger. In 2025, only US$600 billion worth of real-world assets (RWA) were tokenised, a tiny fraction of total global assets, but this number is forecast to grow to US$18.9 trillion by 2033.
There is an important lesson we can learn from the first wave of digitisation. Although there was a dramatic transformation in market processes, the underlying institutions did not disappear. Custodians, depositories, clearinghouses, continued to provide trust in the safety, security, and integrity that ensures the smooth function of financial markets.
The same will be the case with the rise of digital assets: existing institutions will adapt to evolving customer needs, by extending their offering in areas like custody, fund administration, and transfer agency, while also developing entirely new services and leveraging their longstanding experience in facilitating market activity.
In addition, there has been an important shift in the narrative in how the financial system will evolve, as the conversation has moved away from the idea that incumbent businesses will be replaced by a new generation of digital asset disruptors. Nowadays, there is more talk around partnership between traditional industry participants and innovative startups.
For example, in 2025 HSBC made a strategic investment in Elliptic, a DLT analytics provider that provides compliance, risk management, and intelligence operations. Founded in 2015, it is behind one of the first digital currency anti-money laundering (AML) and compliance tools, and our investment is a move to support the safe and scalable adoption of digital currencies and DLT.
The digital asset spectrum
There is a widening range of tokenised instruments that are attracting the interest of institutional investors — including sovereign and corporate bonds, fractionalised RWA, and stablecoins. HSBC is involved in many of the landmark digital asset transactions that have taken place so far.
When it comes to issuance, the creation of new digital assets has come a long way in recent years: major asset managers are launching new products, such as tokenised Treasury and money market funds, while governments and corporates are issuing large-scale digital bonds.
One standout transaction was the issuance of the world’s largest digital bond by the Hong Kong Special Administrative Region government in November last year. This multi-currency green bond — with tranches in Hong Kong dollars, Chinese renminbi, US dollars, and euros — raised HK$10 billion (US$1.3 billion). Institutional investors from a variety of markets participated in the deal, which was facilitated by HSBC.
The issuance of sovereign debt in digital form provides credence to the nascent asset class. And there is more to come.
In February, The UK government selected HSBC as the platform provider for the Digital Gilt Instrument (DIGIT) pilot issuance, an initiative that puts the country in pole position among G7 nations to issue the first-ever tokenised sovereign bonds on a blockchain.
Beyond bonds, there is a drive to tokenise real world assets like real estate, infrastructure, and commodities. Adding these high-value, illiquid assets onto a distributed ledger allows for fractionalisation, where the asset is split into multiple tokens that each represent a small transferable percentage of the asset.
This process can be seen in action in the HSBC Gold Token, a retail product in Hong Kong where each unit represents the fractional ownership record of 0.001 troy ounce of gold, recorded on a distributed ledger. This innovative product broadens access to the gold market, while allowing for the transfer of ownership without moving the underlying physical asset.
The medium of exchange for digital assets is also a token. Stablecoins are a form of digital currency that are designed to maintain a fixed value, as they are pegged on a one-to-one basis to a highly liquid stable asset — such as USD.
As the cash equivalent of digital assets, stablecoins are able to function seamlessly within the digital space. They allow for money to be transferred on the distributed ledger, rather than via traditional banking methods, allowing for instant settlement.
HSBC is also active in this area, as it was recently granted a licence by the Hong Kong Monetary Authority (HKMA) to issue a stablecoin in Hong Kong. The tokens will be launched in the second half of 2026 and will be used for everyday transactions, like peer-to-peer payments and subscribing to tokenised investments.
The evolving regulatory framework
The effective regulation of digital assets is another source of confidence for institutional investors, as the appropriate rules help to build safety into the coming wave of products and processes.
The next five years will be a defining period, due to ongoing policymaker conversations across jurisdictions that are likely to build a consensus on how digital assets will be integrated into the mainstream financial system.
Stablecoins are currently the main regulatory focus across major markets. Last summer, the US signed into law the GENIUS Act, its first federal regulatory framework for stablecoins.
Hong Kong has a new stablecoin ordinance and there is a stablecoin consultation taking place in the UK.
Stablecoin regulations aim to capture the settlement benefits of these digital currencies, while at the same time offsetting the risks. The new rules protect users by ensuring that reserve requirements are always met. They also prevent illicit activity by imposing AML and Know Your Customer (KYC) requirements.
HSBC’s Hong Kong stablecoin for example, will be fully backed at all times by high-quality liquid assets held in segregated accounts, while meeting the highest standards of financial compliance.
“We are advocates for regulation that will drive responsible innovation,” said Sean Mullins, global head of Digital Assets Product, Securities Services, HSBC. “Going forward, more parts of the digital asset ecosystem will fall under regulatory supervision, creating the necessary clarity to scale safely.”
The future of custody
As investors accumulate more digital assets, the question of safeguarding becomes ever more critical. Institutional-grade digital custody solutions are being built to meet the need for everything from segregation to asset servicing and compliance.
Digital assets add a new layer of complexity for a custodian. An important shift will be the management of the private keys that are used to control and transfer a digital asset, creating new requirements for storage and contingency planning. Smart contracts will have to be integrated into operations, marking a shift from executing processes to managing the code that automates them. Custodians will also be expected to be nodes of interoperability by providing the means for different networks to share data and transfer value with each other.
The end result is that an investor will be able to have a unified vision of all their digital holdings, across various assets and networks, along with all the traditional assets in their portfolio. It is a natural extension of a custodian’s fundamental role as an access provider to the markets, products, and assets that investors want exposure to.
Compliance standards will need to be met — covering everything from operational resilience, cybersecurity requirements, as well as the need to store client data in adherence with cross-jurisdictional privacy frameworks.
And given that regulations are still being made, custodians will have to be agile to ensure that they can pivot their operations if there is a sudden change in the rules.
“In short, the custodian of the future will be expected to provide the bank-grade safety that institutional investors expect, and combine it with sophisticated enterprise-grade technology that brings out all of the advantages of digital assets,” said Horsewill.
“The custodians that are able to do this, will be the ones that thrive in the coming digital era.”
A synthesis of the old and the new
It should be clear now that the issuance, trading, and subsequent safekeeping of digital assets will be fully realised by combining the trust, safety, and experience of traditional financial institutions with the innovative potential that DLT promises.
At HSBC, we look forward to continuing our pioneering work in this fast-moving space, by working with partners across the industry to ensure that the mainstream institutional adoption of digital assets will be as safe as it is transformative.
The future of finance is within reach, and we will build it together.
There is clearly strong demand. One survey conducted in 2025, found that 86 per cent of institutional investors had exposure to digital assets or planned to make allocations to the asset class over the course of the year.
And data from another broad survey of investors, banks, and brokers showed that 36 per cent of industry participants are already live with distributed ledger technology (DLT) — the technology that enables digital assets.
The most commonly cited reason driving these projects was the prospect of new product revenues, suggesting that financial institutions see being part of this emerging ecosystem as a major component of future business growth.
“In many ways, the future of finance is already here,” said Fiona Horsewill, global head of Securities Services, HSBC. “The rapid adoption of digital assets among institutional investors is leading to change along the entire value chain, with the potential to reorder the market infrastructure that has defined global finance for generations.”
The next wave of digitisation
The scale of upcoming change can be compared with the move away from paper-based systems towards digitisation that took place in the last half of the 20th century — a multi-decade process that replaced a wide range of manual processes with more efficient digital alternatives. Physical certificates became computerised records, trade settlement was automated, and trading floors were replaced by electronic trading platforms.
What we are seeing today is the next wave of digitisation, as the adoption of DLT by financial institutions has the potential to unlock further efficiency benefits. These include: instant settlement, greater automation from smart contracts, and enhanced liquidity due to 24/7 trading.
But we are still at the early stages of what will be a long-term transition, as demonstrated by the current level of progress in tokenisation — the process by which securities are added to a programmable ledger. In 2025, only US$600 billion worth of real-world assets (RWA) were tokenised, a tiny fraction of total global assets, but this number is forecast to grow to US$18.9 trillion by 2033.
There is an important lesson we can learn from the first wave of digitisation. Although there was a dramatic transformation in market processes, the underlying institutions did not disappear. Custodians, depositories, clearinghouses, continued to provide trust in the safety, security, and integrity that ensures the smooth function of financial markets.
The same will be the case with the rise of digital assets: existing institutions will adapt to evolving customer needs, by extending their offering in areas like custody, fund administration, and transfer agency, while also developing entirely new services and leveraging their longstanding experience in facilitating market activity.
In addition, there has been an important shift in the narrative in how the financial system will evolve, as the conversation has moved away from the idea that incumbent businesses will be replaced by a new generation of digital asset disruptors. Nowadays, there is more talk around partnership between traditional industry participants and innovative startups.
For example, in 2025 HSBC made a strategic investment in Elliptic, a DLT analytics provider that provides compliance, risk management, and intelligence operations. Founded in 2015, it is behind one of the first digital currency anti-money laundering (AML) and compliance tools, and our investment is a move to support the safe and scalable adoption of digital currencies and DLT.
The digital asset spectrum
There is a widening range of tokenised instruments that are attracting the interest of institutional investors — including sovereign and corporate bonds, fractionalised RWA, and stablecoins. HSBC is involved in many of the landmark digital asset transactions that have taken place so far.
When it comes to issuance, the creation of new digital assets has come a long way in recent years: major asset managers are launching new products, such as tokenised Treasury and money market funds, while governments and corporates are issuing large-scale digital bonds.
One standout transaction was the issuance of the world’s largest digital bond by the Hong Kong Special Administrative Region government in November last year. This multi-currency green bond — with tranches in Hong Kong dollars, Chinese renminbi, US dollars, and euros — raised HK$10 billion (US$1.3 billion). Institutional investors from a variety of markets participated in the deal, which was facilitated by HSBC.
The issuance of sovereign debt in digital form provides credence to the nascent asset class. And there is more to come.
In February, The UK government selected HSBC as the platform provider for the Digital Gilt Instrument (DIGIT) pilot issuance, an initiative that puts the country in pole position among G7 nations to issue the first-ever tokenised sovereign bonds on a blockchain.
Beyond bonds, there is a drive to tokenise real world assets like real estate, infrastructure, and commodities. Adding these high-value, illiquid assets onto a distributed ledger allows for fractionalisation, where the asset is split into multiple tokens that each represent a small transferable percentage of the asset.
This process can be seen in action in the HSBC Gold Token, a retail product in Hong Kong where each unit represents the fractional ownership record of 0.001 troy ounce of gold, recorded on a distributed ledger. This innovative product broadens access to the gold market, while allowing for the transfer of ownership without moving the underlying physical asset.
The medium of exchange for digital assets is also a token. Stablecoins are a form of digital currency that are designed to maintain a fixed value, as they are pegged on a one-to-one basis to a highly liquid stable asset — such as USD.
As the cash equivalent of digital assets, stablecoins are able to function seamlessly within the digital space. They allow for money to be transferred on the distributed ledger, rather than via traditional banking methods, allowing for instant settlement.
HSBC is also active in this area, as it was recently granted a licence by the Hong Kong Monetary Authority (HKMA) to issue a stablecoin in Hong Kong. The tokens will be launched in the second half of 2026 and will be used for everyday transactions, like peer-to-peer payments and subscribing to tokenised investments.
The evolving regulatory framework
The effective regulation of digital assets is another source of confidence for institutional investors, as the appropriate rules help to build safety into the coming wave of products and processes.
The next five years will be a defining period, due to ongoing policymaker conversations across jurisdictions that are likely to build a consensus on how digital assets will be integrated into the mainstream financial system.
Stablecoins are currently the main regulatory focus across major markets. Last summer, the US signed into law the GENIUS Act, its first federal regulatory framework for stablecoins.
Hong Kong has a new stablecoin ordinance and there is a stablecoin consultation taking place in the UK.
Stablecoin regulations aim to capture the settlement benefits of these digital currencies, while at the same time offsetting the risks. The new rules protect users by ensuring that reserve requirements are always met. They also prevent illicit activity by imposing AML and Know Your Customer (KYC) requirements.
HSBC’s Hong Kong stablecoin for example, will be fully backed at all times by high-quality liquid assets held in segregated accounts, while meeting the highest standards of financial compliance.
“We are advocates for regulation that will drive responsible innovation,” said Sean Mullins, global head of Digital Assets Product, Securities Services, HSBC. “Going forward, more parts of the digital asset ecosystem will fall under regulatory supervision, creating the necessary clarity to scale safely.”
The future of custody
As investors accumulate more digital assets, the question of safeguarding becomes ever more critical. Institutional-grade digital custody solutions are being built to meet the need for everything from segregation to asset servicing and compliance.
Digital assets add a new layer of complexity for a custodian. An important shift will be the management of the private keys that are used to control and transfer a digital asset, creating new requirements for storage and contingency planning. Smart contracts will have to be integrated into operations, marking a shift from executing processes to managing the code that automates them. Custodians will also be expected to be nodes of interoperability by providing the means for different networks to share data and transfer value with each other.
The end result is that an investor will be able to have a unified vision of all their digital holdings, across various assets and networks, along with all the traditional assets in their portfolio. It is a natural extension of a custodian’s fundamental role as an access provider to the markets, products, and assets that investors want exposure to.
Compliance standards will need to be met — covering everything from operational resilience, cybersecurity requirements, as well as the need to store client data in adherence with cross-jurisdictional privacy frameworks.
And given that regulations are still being made, custodians will have to be agile to ensure that they can pivot their operations if there is a sudden change in the rules.
“In short, the custodian of the future will be expected to provide the bank-grade safety that institutional investors expect, and combine it with sophisticated enterprise-grade technology that brings out all of the advantages of digital assets,” said Horsewill.
“The custodians that are able to do this, will be the ones that thrive in the coming digital era.”
A synthesis of the old and the new
It should be clear now that the issuance, trading, and subsequent safekeeping of digital assets will be fully realised by combining the trust, safety, and experience of traditional financial institutions with the innovative potential that DLT promises.
At HSBC, we look forward to continuing our pioneering work in this fast-moving space, by working with partners across the industry to ensure that the mainstream institutional adoption of digital assets will be as safe as it is transformative.
The future of finance is within reach, and we will build it together.
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