The UK’s financial regulator is exploring proposals to exempt tokenised gold from existing fund regulations, aiming to bolster London’s status as a global centre for bullion trading and custody. The Financial Conduct Authority (FCA) announced on Monday that it is consulting with the Treasury and the Bank of England (BoE) about creating a dedicated regulatory framework for tokenised gold and, potentially, other tokenised commodities.
Tokenised gold refers to digital assets that represent ownership rights over physical gold held by the issuer. These tokens are backed by actual gold bars, which remain in custody to provide tangible value. The FCA highlighted that tokenisation could make the traditionally physical and operationally complex gold market easier to divide, transfer, and trade in digital environments. This innovation could unlock a significant portion of London’s gold reserves, allowing them to be used more efficiently as collateral in financial transactions.
Industry stakeholders have expressed concerns that tokenised gold might currently fall under collective investment scheme (CIS) or alternative investment fund (AIF) regulations. Such classification could limit investor access and hinder the development of tokenised products. In response, the FCA said it is considering a targeted exemption from these regulatory perimeters to facilitate growth in the tokenised gold market. However, officials emphasized that no final decisions have been made on specific changes.
The UK dominates global gold trading but faces increasing competition from China, which is actively developing its own bullion trading hub. Jon Relleen, FCA director of infrastructure and exchanges, noted that discussions with industry participants have identified tokenised gold as a key area of interest. He added that the regulator is reviewing whether current rules are suitable for evolving gold markets and how regulatory innovation might enhance the efficiency and competitiveness of the UK’s financial sector.
These regulatory considerations form part of a broader government and regulatory effort to promote the tokenisation of wholesale financial markets. In a related development, the FCA and BoE released a joint paper underscoring industry feedback that one of the principal benefits of tokenisation lies in improving the efficiency of post-trade operations such as clearing and settlement. The Bank of England is also evaluating proposals to accept tokenised assets, including stablecoins, as eligible collateral within its Sterling Monetary Framework, which facilitates funding for financial institutions.
Overall, the UK is positioning itself to adapt regulatory frameworks to support novel digital asset classes, aiming to maintain its competitive edge in global commodity and financial markets amid a rapidly changing technological landscape.