TLDR
- UK FCA is reviewing rules for tokenized gold and its potential use as wholesale market collateral.
- Tokenized gold could allow digital transfers of ownership rights linked to physical bullion held in custody.
- London handles about 70% of global gold trading volume, according to World Gold Council data.
- Hong Kong is expanding gold infrastructure while tokenized bullion products gain activity among investors.
- Further UK guidance on tokenized collateral is expected later this year as regulators develop market standards.
The UK Financial Conduct Authority (FCA) is preparing a regulatory framework for tokenized gold as London seeks to modernize its bullion market and maintain its position as a global trading center.
The FCA has discussed tokenized gold with major banks and other market participants, with the talks focused on how digital representations of physical gold could operate under UK financial rules. The discussions also cover whether tokenized gold could be accepted as collateral in wholesale markets.
The Financial Times reported that the FCA is considering standards for tokenized gold, with an announcement expected in the coming months. Bloomberg has also reported on the broader development of digital assets and financial market infrastructure.
FCA Examines Tokenized Gold as Collateral
Tokenized gold represents ownership rights linked to physical bullion held by a custodian. The structure allows those rights to be transferred through blockchain-based systems without moving the underlying gold between storage facilities.
The FCA and the Bank of England’s Prudential Regulation Authority are reviewing whether tokenized gold and tokenized money-market funds could qualify as collateral for uncleared over-the-counter derivatives. Such assets could potentially be considered alongside cash and government bonds when firms meet margin requirements.
The regulators began seeking industry views on tokenized collateral in May. Their joint paper said tokenized gold could offer benefits for wholesale markets, subject to suitable standards being developed with industry participants. Responses to the consultation closed on July 3.
Simon Walls, the FCA’s executive director of markets, said, “Tokenization has the potential to transform wholesale markets.” The authorities plan to provide further policy guidance later this year, while broader rule changes are expected to face consultation in 2027.
London Faces Competition From Asian Gold Markets
London accounts for about 70% of global gold trading volume, based on World Gold Council data. The market is now facing increased competition from Asian financial centers, including Shanghai and Hong Kong, which are developing their own precious metals infrastructure.
Hong Kong began trial operations for a government-backed gold clearing house on July 7. The clearing system uses unallocated accounts, which are also widely used in London’s wholesale bullion market.
Tokenized gold products have already gained traction in Hong Kong. HSBC’s tokenized gold product has recorded more than $2.2 billion in trades across more than 276,000 transactions, based on figures provided by the bank.
The development has added pressure on financial centers to establish clear rules for digital gold products. The UK is seeking to integrate tokenization into established financial markets while retaining existing regulatory safeguards.
UK Expands Financial Market Tokenization
The FCA and Bank of England have already expanded work on tokenized financial assets beyond gold. Their broader program covers the issuance, trading, settlement and custody of assets using distributed-ledger technology.
The two authorities are also working with firms through the Digital Securities Sandbox, which allows companies to test tokenized financial market infrastructure under regulatory oversight.
The proposed tokenized gold framework would address areas including custody, ownership, settlement and collateral eligibility. The FCA does not directly regulate ordinary physical gold trading, although it oversees certain gold-linked financial products such as derivatives and exchange-traded instruments.
The UK Treasury’s Wholesale Digital Markets Champion, Chris Woolard, has estimated that faster financial market digitization could add as much as £33 billion annually to UK economic output by 2035.
Further FCA and Bank of England guidance on tokenized collateral is expected later this year, while the wider regulatory roadmap is scheduled to develop through 2027.
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