FCA Considers Separate Regulations for Tokenized Gold Amid London's Dominance

The UK Financial Conduct Authority (FCA) is considering a proposal to exempt certain fund regulations from applying directly to tokenized gold products. [Image: ChatGPT]

According to CoinTelegraph and the FCA, the regulator has begun seeking industry feedback on whether tokenized gold can improve efficiency in trading, transfer, collateralization, and storage. A key issue under discussion is whether tokenized gold falls under existing collective investment schemes (CIS) or alternative investment fund (AIF) regulations. The FCA may introduce separate guidelines or a dedicated regulatory framework for tokenized gold, though no final decision has been made yet.

Tokenized gold represents ownership rights to physical gold as blockchain-based digital tokens, allowing fractional ownership and faster transfers without moving the actual metal. The FCA is particularly focused on how London-held gold could be more widely used as collateral in wholesale financial markets.

This review aligns with broader UK initiatives to tokenize wholesale financial markets. In May, the FCA and Bank of England jointly proposed expanding tokenized securities issuance, trading, settlement, and collateral use. The Bank of England is also working on enabling tokenized versions of eligible assets as collateral through central clearinghouses and central bank transactions. The FCA plans to finalize a joint tokenization roadmap this year based on industry input.

London’s market position plays a significant role, with the London over-the-counter (OTC) market historically serving as the global gold trading hub, accounting for approximately 70% of global nominal trade volume according to the World Gold Council (WGC).

The key issue remains regulatory clarity. Whether tokenized gold is treated under existing fund regulations or as a new type of digital commodity asset will likely impact the speed of blockchain adoption in London’s gold market.