- FCA holds early-stage talks with banks and other market participants
- Discussions build on May policy paper on tokenized assets and collateral
- Regulatory clarity could help London maintain its position as a global gold-trading hub
Britain’s financial regulator is discussing rules for tokenized gold with major banks and other market participants, as the UK seeks to bring digital versions of the precious metal into mainstream financial markets.
The Financial Conduct Authority is examining how digital representations of physical gold could be used in wholesale markets, including as collateral for uncleared over-the-counter derivatives, the Financial Times reported Monday.
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Tokenized gold refers to digital tokens representing ownership of, or a claim on, physical gold held in custody. Allowing such assets to be used as collateral could make it easier for banks and other financial institutions to incorporate digital assets into existing trading and risk-management systems.
Talks Build on Existing Collateral Framework
The discussions build on a May 18 policy paper published jointly by the FCA, Bank of England and Prudential Regulation Authority, which identified tokenized assets including gold as potential collateral for uncleared over-the-counter derivatives.
Rather than creating a separate regulatory category, the approach under discussion would adapt existing wholesale-market rules to tokenized assets, according to the Financial Times.
The PRA has indicated that tokenized assets could receive prudential treatment similar to their conventional counterparts where the underlying legal rights and risks are comparable.
The UK already has a precedent for treating tokenized financial assets within existing rules. In an April policy statement, the FCA confirmed that money market funds, including tokenized versions, can qualify as collateral for uncleared trades under UK EMIR rules.
The Financial Times reported that an announcement on tokenized gold standards could come within the next few months, citing a person familiar with the plans.
The regulatory discussions come as the UK expands infrastructure for digital securities. Sixteen firms are currently participating in live issuance and settlement experiments through the government-backed Digital Securities Sandbox.
The Bank of England is targeting 2027 for upgrades to its collateral infrastructure and 2028 for a service linking digital-asset ledgers with sterling central bank money.
London’s Gold Market Faces Competition
The push to establish clearer rules comes as London seeks to maintain its position as the world’s leading gold-trading center.
London accounts for roughly 70% of global gold trading, according to the Financial Times, although financial centers in Asia are becoming increasingly important competitors.
The scale of London’s physical gold infrastructure is substantial. LBMA data show that London vaults held 9,339 tonnes of gold worth approximately $1.384 trillion at the end of March.
Digital infrastructure could become an increasingly important part of that market. Faster settlement, digital ownership records and the ability to use tokenized bullion within existing financial systems could help connect London’s established gold market with the broader growth of tokenized real-world assets.
The regulatory discussions also come as the gold industry develops its own tokenization initiatives. The World Gold Council is working on a wholesale tokenized gold structure known as “Pooled Gold Interests,” aimed at institutional investors.
Why This Matters
If tokenized gold is formally recognized as eligible collateral, banks and other institutions could have a clearer path to incorporating digital bullion into existing trading and risk-management systems.
That could help bridge traditional commodities markets and digital-asset infrastructure while giving London another tool to compete for gold trading and settlement activity.
But the discussions remain at an early stage, and the FCA has not yet finalized a regulatory framework for tokenized gold.
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