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HSBC to explore using distributed ledger technology in Asia's bond markets

HSBC Bank, together with the Singapore Exchange (SGX) and Temasek, will trial the use of distributed ledger technology (DLT) to streamline some of the challenges faced in the issuance and servicing of fixed income securities in Asia. 

This is the first such end-to-end digitalisation initiative focusing on Asia's bond markets, said HSBC in a statement on Wednesday. 

While the region's fixed income markets continue to see rapid growth, HSBC said bond issuance and servicing processes remain inefficient due to the absence of a single platform for information exchange between multiple parties, and tracking of a bond throughout its life cycle.

The DLT trial will make use of tokenised securities and smart contracts over a permissioned ledger to streamline these workflows and reduce process friction, in turn lowering costs for issuers, investors, bond arrangers and custodians, said the lender.

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A distributed ledger is a database that is consensually shared and synchronised across multiple sites, institutions or geographies. Unlike traditional databases, distributed ledgers have no central data storage or administration functionality. Blockchain is a widely known example of a DLT. 

“The potential of DLT is an evolving story, and its role in overcoming inefficiencies in the fixed income market is yet to be seen," said HSBC Singapore chief executive Tony Cripps. 

"Only by collaborating with market participants will we fully understand its actual viability. By partnering with SGXand Temasek, we hope to explore whether digital assets could become a reality," he added.