The UK Financial Conduct Authority (FCA) is drawing up rules for tokenized gold as Britain tries to push the gold market toward digital infrastructure while keeping London at the center of global bullion trading. According to the Financial Times, the regulator has started speaking with financial institutions about how tokenized gold should be regulated and how related products could be used in wholesale financial markets.
London still handles about 70% of global notional gold trading
London has long been one of the world’s most important gold trading hubs. Its over-the-counter market now represents about 70% of global notional gold trading volume. As markets including China continue to expand gold trading activity and related infrastructure, the UK is looking at financial technology as a way to improve efficiency and defend its competitive position.
The FCA is already examining wider tokenization and digital asset developments, including tokenized gold. It plans to provide more policy direction, with current discussions centered on wholesale financial markets and on how tokenized assets could fit into existing financial infrastructure.
Tokenized gold could be considered for collateral use
In a typical tokenized gold structure, an issuer holds physical gold as reserves and issues blockchain-based digital tokens representing ownership of the metal or related rights. Investors can transfer and trade those tokens while gaining exposure linked to the price of physical gold.
The FCA is asking financial institutions for feedback on whether tokenized gold could also serve as collateral in wholesale markets. If such a framework is put in place, gold could move beyond its traditional use in spot and derivatives trading and extend into on-chain financing, collateral and settlement activity.
The traditional gold market involves custodians, banks, brokers and clearing systems, and some transactions pass through several intermediaries. Blockchain-based records could digitize ownership and transaction history, speed up transfers and settlement, and make it easier for financial institutions to connect gold with digital finance systems.
Rules still need to address reserves, custody and legal rights
Several parts of the regulatory structure remain unresolved. The FCA still needs to clarify the legal relationship between physical bullion and on-chain tokens, whether reserves are fully backed, how the underlying gold is held in custody, what legal rights token holders would have, and how client assets would be treated if an issuer faced financial problems. Those points are likely to shape whether financial institutions are willing to adopt tokenized gold products.
Part of a broader UK tokenization plan
Gold is only one of the assets under review in the UK’s wider financial market digitization program. In recent years, the British government has pushed wholesale financial markets to adopt blockchain and distributed ledger technology, with the aim of gradually moving securities and other financial assets toward digital issuance, trading and settlement.
The FCA and the Bank of England have previously outlined plans for financial market tokenization and modernization. Simon Walls, executive director of markets at the FCA, has said tokenization has the potential to change wholesale financial markets and could reshape how assets are issued, traded and settled.
The UK government has also proposed a broader financial market digitization agenda built around regulatory and infrastructure reforms to improve the competitiveness of the financial sector. Officials estimate that, if the reforms are implemented successfully, they could add about £33 billion to the UK economy each year.
Gold is seen as a practical test case for asset tokenization because it has a mature global market, standardized pricing mechanisms and large institutional trading demand. If the rules become clearer, banks, dealers, custodians and financial technology firms tied to the traditional gold market could all take part in the related digital market infrastructure.
Competition from China adds urgency
Britain’s faster work on tokenized gold also comes as the global bullion market is shifting. London still controls about 70% of global notional gold trading, but China has continued to expand its gold market and related financial infrastructure in recent years, increasing its influence in the global market.
Digitization could alter how financial centers compete. If physical gold can be transferred across borders, pledged and settled through tokenized systems, trading activity can move more easily between markets. In that setting, regulatory systems, liquidity and digital financial infrastructure are likely to influence where capital and transactions go.
For London, a clear rulebook for tokenized gold would help connect its existing bullion market with digital financial infrastructure. The FCA is expected to provide more progress on tokenization regulation in the coming months, with custody of physical assets, token issuance, trading and collateral use all likely to remain in focus.
As RWA tokenization moves deeper into the policy planning of large financial institutions and regulators, the UK is trying to extend its traditional market strengths onto blockchain rails. London already has deep gold liquidity, established financial institutions and trading infrastructure. How those strengths are combined with tokenization technology will affect its standing in the global gold market.