UK watchdog weighs tokenized gold reforms to bolster financial market efficiency

The UK Financial Conduct Authority is weighing a targeted regulatory exemption for tokenized gold as part of efforts to encourage innovation and maintain London’s position in the global bullion market, The Financial Times reported Monday.

The UK currently accounts for roughly 70% of global gold trading volumes, according to the World Gold Council, while China is seeking to expand its role as a major bullion hub.

The FCA is considering a bespoke framework for tokenized gold and potentially other tokenized commodities in cooperation with the Treasury and Bank of England.

The regulator believes tokenization could make gold markets more efficient as it simplifies the division and transfer of bullion while increasing the amount of London-held gold available as collateral.

Still, market participants have warned that uncertainty over collective investment scheme and alternative investment fund rules could limit access to some tokenized gold products.

The FCA said it may work with the Treasury to introduce a targeted exemption from the CIS and AIF regulatory perimeter for selected tokenized gold products or gold market infrastructure, according to the report. Officials stressed that the regulator has not made a decision.

The initiative is part of UK efforts to advance tokenization across wholesale markets. The FCA and BoE said industry feedback points to clearing and settlement as a major opportunity to release capital and collateral, while the BoE is considering accepting tokenized assets such as stablecoins as eligible collateral within its Sterling Monetary Framework.