UK regulators are also examining whether tokenized gold products can be exempted from existing fund regulations, as the authorities consider how blockchain-based bullion can be adopted in London wholesale financial markets.
The Financial Conduct Authority is expected to set out potential changes to the treatment of tokenized commodities in conjunction with the Treasury and Bank of England.
The proposal is to exclude some digital gold products from the rules which apply to collective investment schemes and alternative investment funds. No decisions have been taken. Industry participants have cautioned that uncertainty regarding these classifications may inhibit the adoption of tokenized bullion and investor access.
Tokenized gold usually refers to rights to real gold maintained by the issuer (custodian), allowing gold ownership to be tokenized and exchanged without gold physically changing ownership.
According to Jon Relleen, Director of Infrastructure and Exchanges, the FCA seeks to assess the adequacy of existing frameworks and whether innovation could create efficiencies and increase the competitiveness of UK markets.
This is particularly the case with London, one of the world’s three main bullion markets, where there has been regulatory discussion about whether tokenization could make gold easier to divide, transfer and deploy as collateral without the operational workload of moving bullion bars.
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The FCA and the Prudential Regulation Authority recognized tokenized gold as a type of collateral for uncleared over-the-counter derivatives.
There are also physical bullion products traded on blockchain, such as Tether Gold and Pax Gold, which are tokens backed by physical gold. While some digital asset lending markets accept these, the UK’s work is focused more on the use of tokenized assets within regulated wholesale market infrastructure than on supporting crypto trading.
Separately, the Bank of England is considering whether tokenized assets, including stablecoins, could be admitted as eligible collateral within the Sterling Monetary Framework. UK authorities are also considering the case for digital clearing and settlement systems, given market participants’ views on the value of tokenization in reducing operational frictions and excess collateral buffers.
Besides gold, sixteen firms were on the board of the Digital Securities Sandbox, and the government was planning for the first issuance of a sovereign digital bond via the HSBC Orion platform by the end of the first quarter of 2027. Singapore officials are also looking into tokenized bank deposits, regulated stablecoins and other kinds of digital currencies.
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If the gold is tokenized, the question would arise whether a token representation of stored gold bullion would be de facto subject to the CIS and AIF rules.
Any exemption would need to be worked through with the Treasury before the perimeter is changed. The FCA is open to other options, and the final regime will depend on discussions with government and industry.
