Britain's Financial Conduct Authority is working with the Treasury and the Bank of England on a dedicated regulatory regime for tokenized gold, and is weighing whether to exempt some tokenized gold products and market infrastructure from the rules that currently govern collective investment schemes and alternative investment funds. No final structure has been agreed, but the direction of travel is toward adapting existing wholesale-market rules to tokenized assets rather than inventing an entirely new regulatory category.
Why London Is Moving Now
London's over-the-counter market still accounts for roughly 70% of the world's notional gold trading volume, according to the World Gold Council figures cited in CoinDesk's reporting on the FCA's drafting process. That dominance is increasingly being tested by China's push into bullion trading, and UK officials view tokenization less as a novelty and more as infrastructure that could keep settlement, custody and collateral flows anchored in London rather than migrating to a rival hub. The same reporting put a number on the stakes: a broader UK push to digitize financial markets, of which the gold framework is one piece, could add roughly £33 billion ($44 billion) to annual economic output.
The FCA has not been shy about the timeline pressure. A spokesperson for the regulator said only that it would “have more to say on our approach to tokenisation soon,” while people close to the process expect a more formal announcement within months rather than years — fast by the standards of UK financial regulation, and a signal that the Treasury and Bank of England see this as time-sensitive rather than exploratory.
What the Exemption Would Actually Change
Today, a product that pools investor money into a basket of gold-backed tokens can trip the same rules written for mutual funds and hedge funds — the CIS and AIF regimes — even when the underlying exposure is a single, fully-allocated commodity sitting in a vault. Those frameworks were built for diversified, actively managed portfolios, not for a token that simply represents a claim on physical bullion. The FCA's emerging view is that forcing tokenized gold products through that machinery adds compliance cost without adding investor protection, which is why a carve-out is on the table specifically for products and infrastructure that function more like wholesale commodity markets than collective investment vehicles.
That distinction matters most for how tokenized gold could be used as collateral. The FCA has been consulting major banks and market infrastructure providers on exactly this question — whether a gold token can sit on a balance sheet or back a repo transaction the same way a gold certificate or allocated account does today. An exemption would make that use case far more straightforward, since institutions would not need to treat every tokenized gold holding as if it were a fund unit subject to fund-level reporting, liquidity and marketing restrictions.
The UK effort does not exist in isolation. It follows a broader pattern of British regulators treating digital-asset policy as a growth lever rather than purely a risk to be contained, a posture visible in the House of Lords' recent vote backing a mandatory digital asset strategy and in the government's instruction that the Bank of England prioritize digital money innovation. Tokenized gold, in that context, reads as a test case for how far UK regulators are willing to bend existing fund law to keep a legacy market — physical bullion trading — from losing ground to faster-moving, blockchain-native rivals.
Related: SEC Proposes First Transfer Agent Overhaul Since the 1970s for Tokenized Securities
FAQ
What is tokenized gold?
A digital token that represents ownership of a specific quantity of physical gold held in a vault, allowing the gold to be transferred, traded or used as collateral without moving the metal itself.
Why would tokenized gold need an exemption from fund rules?
Because the UK's collective investment scheme and alternative investment fund regimes were designed for pooled, managed portfolios, and applying them to a token backed by a single commodity adds compliance costs that the FCA believes don't match the actual risk.
Who is involved in shaping the new rules?
The Financial Conduct Authority is leading the work alongside the UK Treasury and the Bank of England, with input from major banks and gold-market infrastructure providers on how tokenized gold could function as collateral.
When will the FCA announce its final approach?
No firm date has been set, but the regulator has said more detail is coming “soon,” and people close to the process expect a formal announcement within months.
