PiCK
London Metal Exchange Weighs Tokenizing Metals in Hong Kong Warehouses, Plans Private Meeting Early Next Month
Summary
- The London Metal Exchange said it is reviewing a plan to tokenize metals stored in Hong Kong warehouses and use them for financing.
- Reuters reported that the exchange aims to turn off-warrant metal inventories into digital assets that can be used as loan collateral.
- Sources said metal-backed digital assets could attract investment from financial institutions and become a new source of revenue for the London Metal Exchange.
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The London Metal Exchange is considering tokenizing metals stored in Hong Kong warehouses for use in financing.
Reuters reported on October 28, citing multiple sources, that the LME has begun reviewing the proposal.
The initiative is understood to be linked to Hong Kong’s strategy to develop itself into a commodities trading hub. In its five-year economic blueprint released last month, Hong Kong outlined plans to expand commodities trading and financing.
The LME told Reuters it is in the early stages of reviewing the tokenization of metal inventories that do not have warehouse warrants issued against them for business financing. As the plan takes shape, it will consult with stakeholders.
The target assets are off-warrant inventories. That excludes stocks for which warehouse warrants have already been issued, as those can already be traded or used as loan collateral based on ownership documents. The idea is to create digital assets backed by inventories without warehouse warrants, where standardized financing arrangements are lacking, and use them as collateral for lending.
The LME plans to hold a private meeting with industry participants early next month to discuss the proposal. Sources told Reuters that metal-backed digital assets could attract investment from financial institutions and become a new source of revenue for the exchange.
