The UK Financial Conduct Authority is examining whether tokenized gold products should receive exemptions from existing fund rules or be governed by a dedicated regulatory framework.
In a call for input, the FCA said it wants to assess how tokenization could affect the trading, transfer, pledging and custody of gold in UK wholesale markets. The regulator is also considering whether tokenized gold could be used as collateral.
The review covers products that represent ownership of physical gold and have transparent backing, clearly defined ownership rights and reliable redemption arrangements. Responses to the consultation are due by Oct. 23.
Regulatory classification remains uncertain
A central issue is whether certain tokenized gold products fall within the UK’s collective investment scheme rules or the perimeter for alternative investment funds. The FCA said uncertainty over classification could affect the development of potential use cases and make some investors less willing or able to hold the tokens.
Depending on the feedback, the regulator could clarify existing rules, establish a recognized classification for specific regulatory purposes, introduce targeted changes to rules or legislation, or consider a bespoke regime for tokenized gold and other tokenized commodities.
Collateral emerges as key tokenization use case
The FCA’s review was published alongside a joint feedback statement from the FCA and the Bank of England on tokenization in wholesale financial markets. The regulators said they received 123 responses to a call for input issued in May, with firms generally supporting the UK’s work in this area.
Collateral was the most frequently cited use case. Respondents requested greater clarity on the eligibility of tokenized collateral, including tokenized money market funds, gold and stablecoins. The FCA and Bank of England said they plan to publish a tokenization roadmap later this year, including details and target dates for each workstream.
London remains the world’s leading over-the-counter gold market, accounting for about 70% of global notional trading volume, according to the World Gold Council. The FCA has also held discussions with banks and other market participants about a possible framework for tokenized gold as the UK develops broader rules for stablecoins and tests digital-pound interoperability in cross-border payments.
