CoinDesk
The Financial Conduct Authority (FCA) is preparing rules for tokenized gold, digital tokens representing ownership of physical bullion, and consulting financial institutions on its use as collateral in wholesale markets. The FCA expects to announce progress on tokenized-asset rules within the next few months. London’s over-the-counter gold market accounts for 70% of global notional trading volume, but China is challenging its lead. A UK Treasury plan projects digitization could add £33 billion ($44 billion) to annual output.
Why it matters
The initiative would put tokenized bullion into institutional market plumbing, not just create a digital representation of gold. The issuer holds physical gold as backing, while the token represents ownership rights. The consultation is testing whether that structure could serve as wholesale collateral.
It also fits a wider UK modernization drive. The FCA and Bank of England revealed tokenization plans in May, and Chris Woolard, the Treasury’s wholesale digital markets lead, set out a 12-month plan in July. FCA markets executive director Simon Walls said tokenization could reshape how assets are issued, traded and settled.
Market impact
For institutions, a workable framework could make tokenized gold easier to use across wholesale markets and give London a clearer route to defend its position as global gold trading faces competition from China. The FCA’s expected update within months is the next regulatory milestone.
Gold reached roughly $5,595 a troy ounce in January before slipping to about $4,340. That move leaves collateral valuation and the quality of physical backing central to any institutional rollout.
Frequently asked questions
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How would tokenized gold be backed under the proposed rules?
The token would represent ownership rights in physical bullion, with the issuer holding the gold as backing.
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Why is the FCA consulting institutions about tokenized gold?
The FCA is seeking feedback on whether tokenized gold could be used as collateral in wholesale markets.
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Why does London matter to the FCA's tokenized-gold strategy?
London's over-the-counter market accounts for 70% of global notional gold trading, but China is increasingly challenging that position.
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What economic impact does the UK's digitization plan project?
A UK Treasury plan projects that digitizing financial markets could add £33 billion ($44 billion) to annual economic output.
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What regulatory milestone comes next for tokenized gold?
The FCA is expected to announce progress on drafting rules for tokenized digital assets within the next few months.
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