UK FCA Prepares Regulatory Framework for Gold Tokenization as London Strives to Maintain Global Gold Market Leadership
The UK Financial Conduct Authority (FCA) is accelerating the development of a regulatory framework for tokenized gold, having engaged in discussions with several major banks, with relevant standard announcements expected within months. Key issues include the use of tokenized gold as collateral in wholesale markets and how to address regulatory gaps within existing powers. Against this backdrop, London holds approximately 70% of global gold trading share but faces the risk of being overtaken
UK regulators are accelerating the construction of a regulatory framework for tokenized gold. This move is part of its broader strategy to digitize financial markets and also reflects the challenges facing London's status as a global gold trading hub.
On August 10, citing insiders, the UK's Financial Times reported that the UK Financial Conduct Authority (FCA) has begun consultations with industry institutions, including several major banks, on the regulatory path for tokenized gold, and is expected to issue announcements on establishing relevant regulatory standards in the coming months.
One of the FCA's core concerns is exploring how tokenized gold can be used as collateral in wholesale markets.
London currently accounts for about 70% of global gold trading volume. However, if London fails to modernize the market through means such as tokenization, its leading position may slip.
Regulatory Layout: From Fragmented Rules to a Systematic Framework
Tokenized gold refers to digital tokens issued to represent gold ownership, with physical gold serving as the underlying asset. Unlike traditional gold products, physical gold bars are held by the token issuer as supporting assets.
The FCA's current regulatory authority in the gold sector is relatively limited. It does not have regulatory power over physical gold transactions, although rules are already in place for gold-based derivatives and gold exchange-traded products listed on public markets.
Citing insiders, the report pointed out that how to properly cover tokenized gold within the existing authority framework is one of the important topics in this round of discussions.
Earlier this year, the FCA and the Prudential Regulation Authority (PRA) of the Bank of England jointly stated that they plan to "further propose policy considerations on how tokenized collateral operates within the existing regulatory framework later this year." The current consultations with the industry are a continuation of this policy process.
Digital Wave: Faster Settlement, Lower Barriers
The broader context for the FCA's promotion of gold tokenization is the UK's overall digital transformation efforts in wholesale financial markets.
The FCA hopes that enterprises can utilize blockchain technology to enhance the speed, efficiency, and security of financial assets across trading, settlement, clearing, and custody stages.
Chris Woolard, the newly appointed Commissioner for Wholesale Digital Markets at the UK Treasury, told the Financial Times last month that accelerating the digitization of financial markets could bring incremental benefits of up to £33 billion to the UK economy.
HSBC's tokenized gold product, launched more than two years ago, provides a market reference. Although currently open only to retail customers in Hong Kong, it has completed over 276,000 transactions to date, with cumulative trading volume exceeding $2.2 billion.
The World Gold Council also pointed out this year that digital gold would mean gold ownership is "no longer constrained by bar specifications, vault locations, or fragmented settlement mechanisms."
