Hang Seng Investment Management is bringing together traditional gold investing and cutting‑edge blockchain technology with a new fund that could reshape how investors access the precious metal.
The firm has launched a physically backed gold exchange-traded fund (ETF) in Hong Kong, with a built‑in roadmap to introduce tokenized units of the same fund on public blockchains, subject to regulatory approval. This approach combines the familiarity of an exchange-listed ETF with the emerging model of on-chain fund ownership.
The Hang Seng Gold ETF began trading on the Hong Kong Stock Exchange on Thursday under the stock code 3170. The product is designed as a passive vehicle that aims to mirror the LBMA Gold Price AM, the widely referenced morning benchmark set in London for the global gold market. To achieve this, the ETF holds physical bullion that complies with the London Bullion Market Association’s good delivery standards, ensuring that the bars meet strict requirements on purity, weight and origin.
All gold backing the ETF is stored in secure vaults in Hong Kong, with HSBC serving as the custodian for the bullion. Institutional participants, known as participating dealers, are able to create and redeem ETF units either in cash or, in certain circumstances, directly in physical gold. Retail investors, however, interact with the product via the stock exchange, buying and selling fund units just like ordinary shares.
The listed class of the Hang Seng Gold ETF is denominated in Hong Kong dollars, with a board lot of 50 units, making it accessible to a range of local investors. The product carries an estimated ongoing charge of 0.40% per year, covering management and operational costs. The fund also discloses an estimated annual tracking difference of minus 0.50%, reflecting anticipated deviations between the ETF’s performance and the LBMA benchmark due to fees and operational factors.
The ETF has no plans to pay dividends. Instead, all returns for investors will be driven exclusively by changes in the underlying gold price. That design makes the product suitable for investors seeking pure exposure to movements in gold rather than income distribution.
Beyond the listed ETF, Hang Seng is charting a more experimental path: the creation of tokenized, unlisted units of the same gold fund. These tokenized units will represent ownership interests recorded on blockchain infrastructure rather than solely in traditional registry systems. The tokenized share class is not yet available; it remains subject to regulatory approval and will initially be offered only through approved distributors.
HSBC has been appointed as tokenization agent for this initiative. In that role, the bank will issue digital tokens that correspond to fund units. Each token will represent one full unit of the ETF or a fraction of a unit, enabling potentially more granular ownership. Subscriptions and redemptions of these tokenized interests will be recorded on a public blockchain, creating an on-chain record of ownership and transactional history.
According to the fund’s prospectus, the tokenization infrastructure will initially be built on Ethereum. The tokenization agent may later extend support to other public blockchains that offer a comparable level of security, resilience and distributed ledger capabilities. This suggests a multi‑chain strategy over the longer term, as the technology and regulatory landscape evolve.
Despite being recorded on public blockchains, the tokenized units are not intended for free trading on open secondary markets. Investors will only be able to subscribe to or redeem their tokenized holdings through designated distributors. That structure keeps the product within a controlled, regulated environment while still leveraging the transparency and programmability of blockchain rails.
The timing of the launch coincides with a powerful rally in gold. On Thursday, prices advanced by another 4%, bringing spot gold close to 5,530 dollars an ounce for the first time. The surge reflects strong demand for safe‑haven assets amid rising economic uncertainty, persistent inflation concerns and heightened geopolitical tensions. For many investors, gold remains a core hedge against systemic risks and currency debasement.
Hang Seng’s move comes as tokenization gains momentum across global capital markets. In the United States, the New York Stock Exchange and its parent company Intercontinental Exchange recently revealed they are building a blockchain-based platform to trade tokenized stocks and ETFs. The planned system aims to enable near‑instant settlement and 24/7 trading, subject to regulatory greenlights, highlighting how exchanges are preparing for a more continuous, digital market structure.
At the same time, digital asset specialists expect tokenization to migrate from pilot projects to mainstream adoption. In a recent report, Sygnum forecast that traditional financial institutions will increasingly integrate blockchain-based infrastructure into their core operations. The firm’s co‑founder and CEO, Mathias Imbach, projected that by 2026, as much as 10% of new bond issuance from major institutions could be tokenized right from launch, signaling a structural shift in how securities are created and managed.
The Hang Seng Gold ETF with a tokenization pathway sits squarely at the intersection of these trends. It offers a concrete example of how a conventional, highly regulated asset class like gold can be bridged into the blockchain ecosystem without abandoning existing investor protections or market practices. The physical bullion, regulated ETF structure and established custodian provide familiarity, while the tokenization framework opens the door to future digital-native use cases.
For investors, the potential benefits of tokenized fund units extend beyond simple novelty. On-chain representation of ownership can streamline recordkeeping, automate parts of the subscription and redemption process and enable faster, more transparent reconciliation between market participants. Over time, tokenized units may also support more flexible collateralization, instant transfer between whitelisted wallets and integration with programmable financial products.
Fractionalization is another important angle. Because each token can represent a fraction of a fund unit, tokenized ETFs could lower the effective minimum investment threshold. That may make institutional-grade gold exposure more accessible to smaller investors and allow for more precise portfolio allocation. For wealth managers, that granularity can support more tailored strategies in portfolios that combine traditional securities and digital assets.
Regulation remains the central factor shaping how quickly and broadly these models can develop. By confining subscriptions and redemptions of tokenized units to approved distributors and avoiding open secondary trading, Hang Seng is clearly working within existing supervisory expectations. This controlled approach could help regulators evaluate tokenized products in a familiar framework while still observing the operational impacts of blockchain-based ownership.
From a market infrastructure perspective, the choice of Ethereum as the initial base layer reflects its dominant position in the tokenization space. Ethereum’s mature smart contract environment and broad institutional familiarity make it a natural starting point. However, the mention of potential expansion to other public blockchains suggests that performance, fees and security considerations may eventually lead to a more diversified architecture, especially as competing networks optimize for institutional use.
Gold itself remains a strategically important asset in the context of digitalization. While cryptocurrencies like Bitcoin are often described as “digital gold,” real gold continues to play a distinct role in portfolios, central bank reserves and risk management. Tokenizing claims on vaulted bullion allows that traditional store of value to plug into the same technological rails that support crypto assets, stablecoins and other tokenized securities, potentially enabling seamless movement of value between these categories.
For Hong Kong, the product also reinforces the city’s ambition to be a regional hub for both traditional finance and digital assets. By blessing physically backed ETFs that experiment with tokenization, local regulators and institutions are signaling that they see blockchain not just as a speculative frontier but as a practical tool for modernizing existing markets. That stance may attract asset managers and fintech firms seeking a jurisdiction open to innovation within a regulated framework.
Looking ahead, if investor appetite and regulatory comfort continue to grow, similar hybrid structures could emerge across other asset classes. Tokenized units of bond funds, property-backed vehicles or multi-asset portfolios would apply the same logic: keep the core investment structure intact while allowing investors or institutions to hold and manage exposures on-chain. In that scenario, the Hang Seng Gold ETF might be remembered as an early example of how the worlds of vaults and validators first came together at scale.
For now, the message is clear: investors in Hong Kong can gain straightforward, exchange-traded exposure to physical gold through the Hang Seng Gold ETF, while the groundwork is being laid for a tokenized share class that could eventually bring that exposure into the blockchain era. The success of this model will depend on market uptake, regulatory outcomes and the broader trajectory of tokenization across global finance, but it signals that physical assets and public blockchains are increasingly part of the same conversation.