FCA Considers New Rules for Tokenized Gold in UK

Britain's financial regulator is exploring a full removal of tokenized gold from the fund rulebook, a step that could reshape how London's bullion storage facilities are utilised.

According to the Financial Times, the Financial Conduct Authority (FCA) will unveil its proposal on Monday.

FCA Aims to Get London's Gold Moving

Tokenized gold provides an investor with a blockchain-based right to physical bullion held in a vault by an issuer.

Market players have relayed to the FCA that ambiguity around whether tokenized gold falls under the UK's collective investment scheme (CIS) or alternative investment fund (AIF) regulations could stall its growth, as both frameworks limit eligible buyers.

As a result, the regulator said it could collaborate with the Treasury on a targeted exemption from those boundaries. Such a carve-out would apply to specific gold tokens or gold market infrastructure.

"Unlike shares or debt securities, which are already issued, traded and settled through mature electronic market infrastructures, tokenisation could make a traditionally physical and operationally complex asset easier to divide and transfer across digital markets," it will say on Monday, according to the FT.

The implications are national. The World Gold Council estimates London accounts for nearly 70% of global gold trading volume, while China is developing a competing bullion centre and pursuing similar business.

Offshore Issuers Dominate the Market London Seeks

Both leading gold tokens are issued outside the UK's regulatory reach. Tether Gold (XAUT) holds $2.63 billion in distributed asset value, and Pax Gold (PAXG) holds $1.87 billion, per RWA.xyz.

Transfer activity is rising for both. Monthly volumes hit $3.70 billion for XAUT and $1.61 billion for PAXG, representing increases of 10.91% and 14.10% over 30 days.

The FCA thinks the change could free up more of London's bullion stock for collateral use. Separately, the Bank will consult later this year on whether clearing houses might accept tokenized collateral.

It is also weighing the addition of tokenised assets, including stablecoins, to its Sterling Monetary Framework, which extends funding to financial institutions.

FCA officials stress that no decisions are final. Whether any exemption reaches retail investors or remains limited to wholesale desks using collateral remains uncertain.