Key facts
- The FCA is developing a regulatory framework for tokenized gold.
- The goal is to allow digital tokens backed by physical gold to be used as collateral in wholesale markets.
- This aims to preserve London's 70% dominance in global gold trading against competition from Shanghai and Hong Kong.
- The initiative follows a joint paper by the FCA, Bank of England, and PRA suggesting equivalent prudential treatment for tokenized assets.
- Industry feedback on the proposal closed in early July 2026.
- Further policy statements and a tokenization roadmap are expected later in 2026.
The UK's Financial Conduct Authority (FCA) is actively working on a regulatory framework for tokenized gold, a move intended to solidify London's position as a global leader in gold trading amidst increasing competition from Asian financial hubs like Shanghai and Hong Kong. The proposed framework would allow digital tokens backed by physical gold to be recognized and utilized as collateral in wholesale markets, particularly for uncleared over-the-counter derivatives.
This initiative builds upon a joint paper released in May 2026 by the FCA, the Bank of England, and the Prudential Regulation Authority (PRA). That paper suggested that tokenized traditional assets, including gold and money-market funds, should receive the same prudential treatment as their non-tokenized equivalents under UK EMIR rules. This would have significant implications for the balance sheets of major financial institutions.
Industry feedback on the vision paper concluded in early July 2026. The FCA is expected to release a feedback statement before the end of summer, with further policy developments and a cross-authority tokenization roadmap anticipated later in the year. While the UK currently does not regulate physical gold trading, the FCA does oversee gold-related derivatives and listed products.
London's long-standing dominance in gold trading is attributed to its deep liquidity, established vaulting infrastructure, and the LBMA benchmark. However, the rise of digital infrastructure and tokenization presents both an opportunity and a challenge. Tokenized gold offers potential efficiency gains, including 24/7 collateral mobilization, automated margin calls, and reduced settlement friction for OTC derivatives, aligning with the trend towards programmable finance.
Global momentum in tokenization is building, with tokenized stocks approaching $2 billion and the UK's Digital Securities Sandbox being a leading regulatory testbed. Clear standards for tokenized gold could attract institutional issuance and custody mandates, further integrating traditional finance with decentralized finance. However, risks related to custody, auditing, legal title, and smart contract security, as well as gold price volatility, need careful consideration. Formal consultations are expected to begin in 2027, with the broader UK tokenization roadmap to be clarified by the end of 2026.