UK Eyes Tokenized Gold Regime to Unlock London Bullion
Britain is exploring a dedicated regulatory route for tokenized gold that could make London's vast bullion market easier to use across digital finance, potentially turning an existing advantage in physical gold trading into one in tokenized collateral.
Summary:
- The FCA is examining bespoke rules for tokenized gold.
- London handles roughly 70% of global gold trading.
- Tokenized bullion could become more usable as collateral.
- The Bank of England is separately opening collateral systems to tokenized assets.
The Financial Conduct Authority is seeking industry views on whether tokenized gold needs bespoke regulatory treatment rather than being captured by rules designed for conventional investment funds.
The regulator is examining whether certain structures could be exempted from parts of the UK’s collective investment scheme and alternative investment fund frameworks. The consultation, announced on Financial Times on September 14, is open until October 23.
The distinction could determine how easily financial institutions can issue, hold and transfer digital claims on physical bullion.
Existing fund rules were designed around pooled investment structures. A token representing identifiable rights over vaulted gold can have a different economic function, particularly when the objective is to transfer or pledge the asset rather than pool investor capital under a fund manager.
The FCA is specifically asking how tokenization could improve the transfer, pledging and custody of gold, while preserving market integrity and consumer protection.
That puts collateral, rather than another retail gold product, at the center of the proposal.
London starts with 70% of global gold trading
The potential impact is amplified by the scale of Britain’s existing bullion market.
London handles roughly 70% of global gold trading, according to World Gold Council.
That gives the UK something many tokenization projects lack: a large established market and custody infrastructure before the digital layer is introduced.
The opportunity is therefore not dependent on attracting investors to a new asset class. Gold is already heavily traded, held by institutions and accepted in collateral frameworks. The regulatory question is whether digital representations of that bullion can perform some of those functions with fewer operational constraints.
Fractionalization is one advantage. A digital representation can divide economic interests in bullion into smaller units without requiring the physical bar itself to be divided. Transferability is another, particularly if ownership records can move through infrastructure operating beyond the settlement windows of conventional markets.
But institutional adoption would depend on a more consequential function: whether tokenized bullion can be pledged with sufficient legal certainty to serve as collateral.
Bank of England is working on the collateral side
The FCA’s gold initiative fits into a broader wholesale tokenization strategy already being developed with the Bank of England.
In May, the two authorities set out a joint vision for tokenized wholesale markets covering regulatory treatment, settlement infrastructure and collateral. The Bank committed to work toward allowing tokenized equivalents of assets that are already eligible to be used as collateral at central counterparties and in its own operations.
The distinction between the two initiatives is important.
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The FCA can address whether tokenized gold falls into an appropriate regulatory category and how the product can operate. The Bank’s work addresses whether tokenized assets can eventually perform the same collateral functions as their conventional equivalents within critical financial infrastructure.
The Bank is also targeting a live synchronization service for 2028, while the two authorities are already working with 16 firms on live tokenized issuance and settlement through the Digital Securities Sandbox.
Gold could become an unusually practical test of that architecture because the underlying asset already has an established role in institutional finance.
Legal ownership matters more than the token
For banks and clearing members, putting gold on a distributed ledger does not automatically make it acceptable collateral.
The central issue is whether ownership of the token creates an enforceable claim over the underlying bullion.
That requires clarity around legal title, redemption, custody, asset segregation and insolvency treatment. If an issuer or custodian fails, the holder needs certainty over whether the token provides a direct claim on the gold or merely leaves the investor as a creditor of an intermediary.
Once those rights are established, tokenization could address operational inefficiencies.
Digital infrastructure could allow eligible collateral to be pledged, released or substituted as margin requirements change, with ownership and transaction records updated within the same system. That could reduce reconciliation between custody, settlement and collateral-management records.
For wholesale markets, this is where tokenization becomes materially different from simply offering fractional gold ownership.
Tokenized gold could reinforce London’s existing advantage
The UK is effectively testing whether an established physical commodity market can be connected to tokenized financial infrastructure without forcing the digital representation into a regulatory framework built for a different product.
The FCA is already reforming the broader alternative investment fund regime, where UK managers oversee almost £2 trillion in alternative assets, while separate rules introduced this year are advancing fund tokenization.
Gold adds a different dimension because London already dominates the underlying global market.
The next test will be whether the FCA’s eventual framework gives token holders sufficiently clear rights over physical bullion and whether the Bank of England ultimately recognizes compatible tokenized assets in collateral operations.
If both pieces align, Britain’s advantage would not come from issuing the largest number of gold tokens. It would come from making part of an already dominant bullion market usable inside the next generation of wholesale financial infrastructure.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Stefanov
Reporter at CoinsPress
Alex is Editor-in-Chief of Coinspress and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
