UK Considers New Path For Tokenized Gold

FCA Prepares Tokenized Gold Reform Proposals

The UK's Financial Conduct Authority (FCA) is set to outline possible reforms for tokenized gold products, as the regulator examines how digital representations of physical bullion could be made easier to use across London's wholesale financial markets.

The FCA is considering whether certain tokenized gold products should be exempt from UK collective investment scheme and alternative investment fund rules. Industry participants have warned the FCA that uncertainty over whether tokenized gold products fall under these frameworks could slow development and limit access for some investors.

The FCA will set out the potential changes as part of work with the Treasury and Bank of England on whether tokenized gold, or tokenized commodities more generally, need a dedicated regulatory framework. No final decision has been made, and the regulator remains open to other approaches.

London's Bullion Market at Stake

The regulatory push carries significant commercial weight. London remains the world's dominant over-the-counter gold market, accounting for about 70% of global notional trading volume, according to the World Gold Council. LBMA data show London vaults held 9,339 tonnes of gold valued at about $1.384 trillion at the end of March.

Regulators believe tokenization could make some of those reserves easier to divide and transfer digitally, potentially allowing bullion to move through collateral arrangements without requiring the same operational processes involved in transferring physical bars. The regulatory discussions come as London faces stronger competition from Asian financial centers seeking a larger role in bullion trading.

The work builds on a May 18 joint policy paper from the FCA and Bank of England, including the Prudential Regulation Authority, which explicitly identified tokenized gold as a possible form of collateral for uncleared OTC derivatives. The Bank of England is also considering whether tokenized assets, including stablecoins, could become eligible collateral under its Sterling Monetary Framework.

The World Gold Council is also developing a wholesale digital gold structure known as Pooled Gold Interests, a proposed model that combines physical ownership with digital transfer and is aimed primarily at institutional and wholesale participants.

Sources:
UK FCA weighs regulatory exemption for tokenized gold products (Crypto.news)
Why the UK financial watchdog is drafting new rules for gold tokenization (CoinDesk)
UK Regulator Explores Tokenized Gold Rules Exemption (Cointelegraph)