Digital assets: Paving the way for institutional entry

Digital assets: Paving the way for institutional entry

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.

The future of finance is already here, with strong institutional demand for digital assets driving change across the entire market infrastructure value chain.

Instant settlement, greater automation, and enhanced liquidity, are just some of the benefits that could be delivered by distributed ledger technology.

Institutional-grade digital custody solutions are being built to meet the evolving needs for asset safeguarding.

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% of institutional investors had exposure to digital assets or planned to make allocations to the asset class over the course of the year¹.

And data from another broad survey of investors, banks, and brokers showed that 36% of industry participants are already live with distributed ledger technology (DLT)² – 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 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 USD 600 billion worth of real-world assets were tokenised, a tiny fraction of total global assets, but this number is forecast to grow to USD 18.9 trillion by 2033³.

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.

Institutional investors will only buy into the benefits of digital assets if they are built on the same level of trust and security that they find in existing markets. And this confidence will come from the industry participants that have been an essential part of the market ecosystem for generations.

Sean Mullins | Global Head of Digital Assets Product, Securities Services, HSBC

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 operations⁴. Founded in 2015, it is behind one of the first digital currency anti-money laundering and compliance tools, and our investment is a move to support the safe and scalable adoption of digital currencies and DLT.

There is a widening range of tokenised instruments that are attracting the interest of institutional investors – including sovereign and corporate bonds, fractionalised real-world assets (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 HKD, RMB, USD, and EUR – raised HKD 10 billion (approximately USD 1.3 billion). Institutional investors from a variety of markets participated in the deal, which was facilitated by HSBC⁵.

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 blockchain⁶.

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 Token⁷, 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 license by the Hong Kong Monetary Authority (HKMA) to issue a stablecoin in Hong Kong⁸. 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.

HSBC has enabled the issuance of more than USD 3.5 billion in digitally native bonds