Hang Seng Taps Ethereum for Planned Tokenized Gold Fund Units

Hang Seng Investment Management has rolled out a new physically backed gold exchange-traded fund (ETF) in Hong Kong, with an option for future tokenized access to the asset.

The Hang Seng Gold ETF, which began trading on the Hong Kong Stock Exchange on Thursday under stock code 3170, is designed to track the LBMA Gold Price AM, the widely used morning benchmark set in London. The fund is structured as a passive ETF and holds physical gold bars that meet London Bullion Market Association good delivery standards, according to product details.

Gold held by the ETF is stored in vaults in Hong Kong, with HSBC acting as gold custodian. The structure allows for both in-cash and, in certain cases, in-gold creation and redemption by participating dealers, though retail investors trade units on the secondary market like ordinary shares.

The listed class of the ETF trades in Hong Kong dollars and has a board lot size of 50 units. It carries an estimated ongoing charge of 0.40% per year and an estimated annual tracking difference of minus 0.50%. Hang Seng said the fund does not intend to make any dividend distributions, meaning returns will depend entirely on movements in the gold price.

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Hang Seng maps out tokenized gold units

Beyond the listed ETF, Hang Seng also outlined plans for tokenized unlisted units of the same fund. These tokenized units, which would represent ownership interests recorded on blockchain infrastructure, are not yet available and remain subject to regulatory approvals.

HSBC has been appointed as the tokenization agent and will issue digital tokens that represent ownership of fund units. Each token will correspond to a unit (or a fraction of a unit), and subscription and redemption transactions will be recorded on a public blockchain.

“Initially, the Tokenisation Agent intends to utilise Ethereum as the primary blockchain. Other public blockchains with comparable level of security resiliency and distributed ledger technology may be adopted in future,” according to the prospectus.

Still, tokenized units can only be subscribed to or redeemed through approved distributors. There won’t be secondary market trading.

Gold prices surged another 4% on Thursday, pushing spot gold close to $5,530 an ounce for the first time as investors continue to seek safe-haven assets amid increasing economic and geopolitical uncertainty.

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Last week, the New York Stock Exchange and parent Intercontinental Exchange announced that they are developing a blockchain-based platform to trade tokenized stocks and ETFs, with plans for 24/7 trading and near-instant settlement, pending regulatory approval.