Hang Seng debuts physically backed Hong Kong gold ETF with plans for tokenized units

Hang Seng Investment Management has launched a Hong Kong‑listed ETF that holds physical gold meeting London good‑delivery standards, with custody placed in HSBC’s local vaults. The fund tracks the LBMA morning benchmark and trades in Hong Kong dollars on the local exchange, giving retail investors secondary‑market access through ordinary brokerage channels. The product charges an ongoing fee of 0.40% per year and the manager estimates an annual negative tracking difference of roughly 0.50%, with returns tied directly to bullion movements and no dividend distributions. Standard ETF mechanics are retained: cash creations dominate but the structure allows, under certain conditions and via participating dealers, creations and redemptions in metal to help maintain arbitrage between NAV and market price. Alongside the listed share class, Hang Seng has described a separate, unlisted tokenized representation of the same fund: HSBC would act as the tokenisation agent, issuing token units recorded on a public blockchain (Ethereum named as the initial chain) to reflect subscriptions and redemptions. Those tokenized units would not be tradable on a secondary market and would be available only through approved distributors, constraining immediate liquidity and eliminating typical on‑chain price discovery and composability. The prospectus allows migration to other public chains with comparable security characteristics in the future. This dual‑path design intentionally pairs a regulated, liquid listed vehicle for general investor access with a controlled, ledger‑based distribution channel that keeps issuance and redemption flows off public trading rails. That conservatism contrasts with other market approaches — some tokenized gold products embed lending and yield features and permit on‑chain trading and DeFi composability — which can boost utility but also introduce additional counterparty, custody and contagion risks. Operational concentration is a material consideration: tokenization centralises critical functions with the custodian and the tokenisation agent, and on‑chain settlement depends on robust operational controls and clear regulatory sign‑off. Regulators’ decisions, distributor onboarding and how the tokenised plumbing will practically interact with the listed ETF’s creation/redemption mechanics are likely to determine whether the unlisted token layer proceeds and how broadly it is adopted. Strategically, the product signals a measured path for mainstream asset managers to experiment with blockchain distribution while preserving the regulated, transparent market access provided by traditional ETF listings.