UK FCA Prepares Tokenized Gold Framework to Modernize London Bullion Market

Highlights:

• FCA is developing a regulatory framework for tokenized gold to help London compete with Shanghai and Hong Kong.
• Regulators are exploring how tokenized gold could work as collateral in wholesale markets under UK financial rules.
• HSBC’s Hong Kong tokenized gold product has seen $2.2 billion traded across more than 276,000 transactions.

The UK Financial Conduct Authority (FCA) is preparing a regulatory framework for tokenized gold as Britain looks to modernize its financial markets and protect London’s leading position in global gold trading. According to an August 10 Financial Times report, the regulator has already held early talks with major banks and other industry participants about the plan.

The FCA is exploring how tokenized gold could operate under UK financial rules and how firms could use it as collateral in wholesale markets. The regulator is expected to provide more details about possible standards within the next few months. However, the FCA declined to comment directly on the discussions.

Tokenized gold is a digital representation of physical gold. An issuer holds real gold bars and creates digital tokens that represent ownership rights in that gold. The model can make gold easier to divide, transfer and use within blockchain-based financial systems.

UK FCA Plans Regulatory Framework for Tokenized Gold

According to the Financial Times, the UK Financial Conduct Authority (FCA) is discussing a regulatory framework for tokenized gold with major banks and other industry participants. The framework could support the use of… pic.twitter.com/oTyV5WlQOb

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FCA Explores Tokenized Gold as London Faces Competition

London remains the world’s largest center for gold trading. The market accounts for about 70% of global notional gold trading volume, according to the World Gold Council. However, China is working to strengthen Shanghai and Hong Kong as major bullion trading centers.

One person familiar with the FCA discussions told the Financial Times that there was “huge competitive pressure from Shanghai and Hong Kong.” The person also warned that other markets could gain ground if London does not modernize its gold infrastructure.

The FCA does not directly regulate physical gold trading. However, it sets rules for areas including gold derivatives and exchange-traded products listed on public markets. Therefore, officials are examining how tokenized gold could fit within the existing regulatory system.

The work is part of a wider UK effort to bring blockchain technology into traditional finance. Regulators want financial firms to explore digital systems that could improve how assets are traded, settled, cleared and stored. UK wholesale digital markets champion Chris Woolard recently estimated that faster financial market digitization could provide a £33 billion boost to the UK economy.

HSBC Tokenized Gold Shows Demand for Digital Assets

Tokenized gold is already being used in Hong Kong. HSBC launched a tokenized gold product for its retail customers there more than two years ago. Since the launch, customers have traded more than $2.2 billion worth of the product through more than 276,000 transactions, according to figures provided by the bank.

The World Gold Council has also supported efforts to digitize gold ownership. Digital structures can allow investors to own smaller portions of physical gold while reducing some limits linked to traditional bar sizes, storage locations and settlement systems.

The FCA’s planned framework could now provide clearer rules for banks and other financial firms interested in tokenized gold. The next key development will be the regulator’s expected announcement on standards as the UK expands its broader push toward blockchain-based wholesale markets.