Britain's Financial Conduct Authority has held talks with banks and other industry participants over potential rules for tokenized gold, the Financial Times reported on Monday. The regulator has also sought feedback on whether tokenized gold could serve as collateral in wholesale markets, people familiar with the matter told the newspaper. The FCA plans to outline new regulatory standards in the coming months.
The move comes as London holds about 70% of global notional gold trading volume, a figure the World Gold Council has cited, and as Asian competitors have moved to chip away at that share.
London's gold market faces an unfamiliar challenge
For decades, London's position in gold trading rested on the infrastructure beneath the city, including the vaulted bullion and clearing conventions that underpin the London Bullion Market Association's price benchmarks, used to price gold worldwide. That infrastructure gave the city a stability that was difficult to replicate elsewhere.
What has changed is the terrain. Hong Kong launched a central clearing system for gold and a new gold price ticker to attract investors to the city. Shanghai has pursued ambitions to become a global wholesale hub for bullion. If London does not modernize its market through measures including tokenization, other exchanges may replace its central position in the future.
Tokenized gold refers to digital tokens that represent ownership rights in physical gold, with issuers holding bullion to back those tokens. In principle, a bar of gold represented as a token can settle in seconds on a shared ledger, which removes friction that traditional infrastructure absorbed as a cost of business. That is the competitive lever a challenger could use to pull volume away from London, and the FCA's reported response is to write the rules for that shift rather than let it happen in another jurisdiction.
What the FCA is actually building
The framework would set out how physical gold can be represented and settled as digital tokens under FCA oversight. For a market that still clears much of its trade through unallocated-account systems built over decades, that is a material change in direction.
Several questions have to be answered before the framework can work as intended. Custody and redemption come first. A gold token is only as good as the claim it represents, so the rules have to define who vaults the metal and what a token holder can do if the custodian fails. Unallocated gold, where a holder is effectively an unsecured creditor of a bank rather than the owner of specific bars, is the exact ambiguity that tokenization is meant to eliminate. Whether the FCA requires allocated backing is the detail that separates a genuine upgrade from a repackaged account structure.
Legal settlement finality is a second open question. Onchain transfers need to be treated as final delivery under law for the technology to function as advertised, and that is a legal determination as much as a technical one.
A government already betting on tokenization
The FCA's plans for gold do not exist in isolation. A government-backed industry task force said in July that tokenization could add as much as 33 billion British pounds, or $44 billion, to the UK's annual economic output by 2035. The same roadmap calls for the UK's first tokenized government bond by early 2027 and seeks to make tokenized securities eligible for settlement and collateral use in financial markets.
Gold is one of the more tractable test cases for that broader agenda. It trades in deep, liquid markets with a globally agreed price, and its custody model is well understood by regulators. A framework that works for gold would be easier to extend to other physical assets than one built around instruments with more complex underlying structures.
How much gold is already intertwined with crypto infrastructure is visible in Tether's reserve disclosures. The stablecoin issuer recently reported a record 146 tonnes of gold backing its reserves. A regulated tokenized-gold market in London would give holdings of that kind a cleaner path between physical vaults and digital rails.
The details that decide whether this works
The Financial Times reporting describes intent and preparation, not a finished rulebook. UK financial rulemaking runs through consultation periods before standards become binding, which means a functioning market for tokenized gold in London is likely quarters away at minimum.
What the FCA proposes on custody and redemption will be the decisive test. A token that cannot be cleanly redeemed for physical metal, or that leaves holders exposed to a custodian's credit risk, does not resolve the structural weaknesses of the existing unallocated gold system. The framework's value rests on how those specifics are written.
The FCA has not confirmed when formal consultation will begin.
Gunel Ismayilova
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