UK FCA prepares tokenized gold framework as London defends 70% share

The UK Financial Conduct Authority is discussing regulatory standards for tokenized gold with major banks and other market participants, exploring how digital representations of physical bullion could operate in wholesale markets, the Financial Times reported Aug. 10.

The talks build on a May 18 joint policy paper from the FCA, Bank of England and Prudential Regulation Authority that identified tokenized gold as a possible form of collateral for uncleared over-the-counter derivatives, alongside tokenized money market funds.

London vaults held 9,339 tonnes of gold valued at about $1.384 trillion at the end of March, LBMA data show, and the city accounts for roughly 70 percent of global gold trading volume, according to the Financial Times.

An announcement on developing tokenized gold standards is expected within the next few months, a person familiar with the FCA's plans told the Financial Times, with a full cross-authority tokenization roadmap due later in 2026.

Rules adapt the existing wholesale framework

The FCA has not produced a standalone rulebook for tokenized gold. The approach under discussion adapts existing wholesale-market rules rather than creating a separate regulatory category for each tokenized asset, the May paper said. The PRA has indicated tokenized traditional assets should generally receive the same prudential treatment as conventional equivalents when their legal rights and underlying risks are comparable.

The Bank of England plans to consider how tokenized versions of assets already accepted as regulatory collateral could qualify at central counterparties under UK EMIR. The FCA and PRA are separately examining tokenized gold for uncleared derivatives collateral.

There is already a precedent involving funds. An April FCA policy statement confirmed that a range of money market funds, including tokenized versions, can qualify as collateral for uncleared trades under UK EMIR. The same statement said authorized UK funds are not prevented from investing in tokenized forms of otherwise eligible assets.

London's bullion crown faces Asian competition

The regulatory work comes as London faces stronger competition from Asian financial centers seeking a larger role in bullion trading. The World Gold Council is developing a wholesale digital gold structure known as Pooled Gold Interests, which combines physical ownership with digital transfer for institutional participants.

HSBC's tokenized gold product, launched more than two years ago and available only to Hong Kong retail clients, has completed more than 276,000 transactions totaling over $2.2 billion. A UK government-backed industry task force projected tokenization could add as much as 33 billion pounds, about $44 billion, to the UK's annual economic output by 2035.

Infrastructure work is advancing alongside the rules. Sixteen firms are working through the Digital Securities Sandbox, while the Bank of England plans upgrades to its securities and collateral system in 2027 and targets 2028 for a synchronization service connecting digital asset ledgers with sterling central bank money. The UK's first tokenized government bond is targeting its first transaction by the end of Q1 2027 using HSBC's Orion platform.

The next step for gold is regulatory detail. Authorities still need to determine standards covering eligibility, legal ownership, custody and risk before tokenized gold can become a routine source of collateral across UK wholesale markets.

This article is for informational purposes only and does not constitute investment advice.