The FCA wants financial firms to use blockchain technology to make the trading, settlement, clearing and custody of financial assets faster, more efficient and secure.
The UK Financial Conduct Authority is exploring rules for tokenized gold as London seeks to modernize its bullion market amid growing competition from China, the Financial Times reported Monday.
The FCA has consulted industry participants, including large banks, on how tokenized gold should be regulated and has been gathering views on its potential role as collateral in wholesale markets.
Tokenized gold uses blockchain-based digital tokens to represent ownership rights in physical gold held by an issuer. Supporters argue the structure could make gold easier to trade, settle and use as collateral without requiring every transaction to involve the physical movement of bullion.
The regulatory initiative comes as Shanghai and Hong Kong are seeking to establish themselves as major international bullion centres, which could threaten London’s grip on global gold trading and volume.
Shanghai, via the Shanghai Gold Exchange, and Hong Kong are actively expanding their infrastructure and cooperation to strengthen their roles in international bullion trading and gold price discovery.
The FCA and the Bank of England’s Prudential Regulation Authority have already indicated that they intend to develop further policy around tokenized collateral later this year. The objective is to enable blockchain technology to improve the speed, efficiency and security of trading, settlement, clearing and custody across the financial markets.
