The U.K. Financial Conduct Authority is actively developing a regulatory framework for tokenized gold as wholesale collateral, with standards for this framework expected to be announced in the coming months. The FCA has approached financial institutions to explore tokenized gold regulations, seeking feedback on how tokenized gold could function as collateral in wholesale markets. The initiative builds on a May 18 joint policy paper from the FCA and Bank of England that explicitly identified tokenized gold as a possible form of collateral for uncleared over-the-counter derivatives. According to the Financial Times, the FCA has been in private discussions with banks about how it could regulate tokenized gold, though the regulator declined to comment on these talks. The review examines whether tokenized gold should count as margin on uncleared over-the-counter derivatives, potentially putting tokens next to cash and government bonds in daily margin calls.
London's dominant position in global gold trading provides significant weight to the regulatory initiative, with the city accounting for roughly 70% of worldwide gold trading volumes. More than $160 billion a day changed hands in the loco London market in 2025, according to the World Gold Council. However, the FCA's work reflects competitive pressure on London's bullion industry from Asian rivals, particularly China, which is increasingly challenging London's dominance. The tokenization of gold represents a strategic response to preserve London's position as the top global hub for gold trade. The price of gold reached an all-time high of roughly $5,595 a troy ounce in January, but has since slipped and is currently priced at about $4,340. This price volatility underscores the importance of maintaining London's competitive edge through regulatory innovation.
The regulatory work builds on established precedents for tokenized assets in wholesale markets, with the FCA and Bank of England's Prudential Regulation Authority already reviewing the eligibility of tokenized gold and tokenized money-market funds as collateral for uncleared over-the-counter derivatives. An April FCA policy statement confirmed that money market funds, including tokenized versions, can qualify as collateral for uncleared trades under UK EMIR. The FCA and Bank of England said in their joint call for input on May 18 that they were examining tokenized collateral eligibility, recognizing the benefits of tokenized money market funds and tokenized gold as uncleared OTC collateral, "subject to developing standards with industry." The Bank of England plans to set out further policy later this year on how tokenized collateral can operate under existing rules, with a discussion on assets that clearing houses already accept under UK EMIR due in the third or fourth quarter. The FCA does not directly regulate ordinary physical gold trading, but regulates financial instruments linked to gold, including certain derivatives and exchange-traded products.
Sixteen firms are currently working through Britain's Digital Securities Sandbox on live tokenized asset infrastructure, with the FCA and Bank of England already working with these firms on live issuance and settlement of tokenized assets. The Bank of England plans upgrades to its securities and collateral system in 2027 and is targeting 2028 for a synchronization service connecting digital asset ledgers with sterling central bank money. The broader tokenization initiative covers issuance, trading, settlement, collateral and infrastructure needed to move tokenized finance beyond pilot projects, with tokenized gold representing a significant extension of this modernization effort into one of London's most important commodity markets. Currently, there is no trading volume reported for tokenized gold, which could be temporary as the market awaits regulatory clarity. The FCA finalized separate rules for fund tokenization in April, with the two authorities planning to finalize a roadmap by the end of the year and consult on most rule changes in 2027.
The tokenized gold initiative is part of Britain's broader strategy to integrate distributed-ledger technology into established wholesale financial markets, with the FCA's Chris Woolard estimating that faster digitization of financial markets could contribute as much as £33 billion annually to UK economic output by 2035. Chris Woolard, the U.K. Treasury's wholesale digital markets lead, laid out a 12-month plan in July to speed up the digitization of the country's financial markets. "Tokenization has the potential to transform wholesale markets – reshaping how assets are issued, traded and settled," Simon Walls, executive director of markets at the FCA, said when the May paper was published. Moving gold onto blockchain infrastructure could make collateral more portable and potentially allow ownership to be transferred more quickly than through conventional market infrastructure. Tokens could enable fractional ownership while reducing operational friction associated with moving claims on bullion between custodians and counterparties. The FCA and Bank of England closed their broader tokenization consultation on July 3, with their published timetable calling for industry workshops, a response statement during the summer and a full cross-authority roadmap later in 2026.
