- The Financial Conduct Authority will present potential reforms Monday to exempt tokenised gold from UK fund regulations, working alongside the Treasury and Bank of England to strengthen London’s position in bullion trading and custody.
- Tokenised gold creates digital assets representing ownership of physical gold bars held by the issuer as backing. Industry participants had flagged to the FCA that uncertainty over whether such tokens fall under collective investment scheme or alternative investment fund rules could restrict investor access.
- The FCA is considering working with the Treasury to potentially create a targeted exemption from those fund-rule perimeters for certain tokenised gold products or gold market infrastructure. Officials stressed no decisions have been made and the approach remains open.
- London holds about 70% of global gold trading volumes according to the World Gold Council, but faces rising competition from China as it seeks to become a bullion hub. The proposal sits within a broader FCA and Bank of England push to encourage tokenisation across wholesale financial markets, including freeing up capital tied up in post-trade processes like clearing and settlement.
What Happened?
FCA director of infrastructure and exchanges Jon Relleen said tokenised gold has emerged as a clear area of industry interest, and the regulator wants to test whether existing frameworks still fit gold markets or whether innovation could improve UK competitiveness. The FCA argues that unlike shares or debt, which already trade through mature electronic infrastructure, gold is a physically bound and operationally complex asset that tokenisation could make easier to divide and transfer digitally. In a separate paper the same day, the FCA and Bank of England will say industry participants see the biggest tokenisation opportunity in freeing up collateral tied up in post-trade operations, citing research showing US market participants hold roughly 7% more collateral than necessary as an extra buffer.
Why It Matters?
This is a regulator trying to convert an incumbency advantage into a durable one before a rival takes it. London’s 70% share of global gold trading is a legacy position built on physical vaulting and settlement infrastructure — exactly the kind of advantage that erodes if a competitor digitises faster. China’s ambitions to become a bullion hub give this proposal real urgency beyond routine market modernisation. The practical unlock is collateral velocity: gold sitting in London vaults today is difficult to mobilise quickly in financial transactions, and a workable token wrapper could let institutions use bullion as collateral with the same ease as tokenised securities, without the operational friction of physical transfer. The parallel move to let the Bank of England accept tokenised assets, including stablecoins, in its Sterling Monetary Framework signals this is part of a coordinated infrastructure shift, not an isolated gold-market tweak.
What’s Next?
Watch for the scope of any eventual CIS/AIF exemption — whether it covers specific tokenised gold products, broader gold market infrastructure, or both, will determine how much new capital can actually flow in. The Bank of England’s planned consultation later this year on allowing central counterparty clearing houses to accept tokenised assets as collateral is the next concrete regulatory step to track. Competitive dynamics with China’s bullion hub ambitions are likely to shape the pace of UK implementation — a slow, consultative approach risks ceding first-mover advantage in tokenised commodity infrastructure even while London retains its underlying trading volume.
Source: Financial Times
