Tokenized gold could soon get a much clearer path into the UK financial system, as the Financial Conduct Authority weighs whether to pull certain gold-backed digital assets out of the country’s fund rulebook.
The proposal, reported by the Financial Times, could reshape how London’s enormous bullion market interacts with blockchain. The FCA is expected to outline the idea Monday, potentially opening a door that has so far been clouded by regulatory uncertainty.
At its simplest, tokenized gold turns a physical bar sitting in a vault into a blockchain-based claim. Instead of dealing with the metal as a purely physical asset, holders can transfer digital representations of gold through blockchain networks.
The problem is where regulators put those tokens. Industry participants have warned the FCA that uncertainty over whether tokenized gold falls under the UK’s collective investment scheme or alternative investment fund rules could slow the market’s development. Both frameworks come with restrictions on who can invest.
The FCA is now considering a targeted exemption, potentially developed with the Treasury. The carve-out could apply to specific gold tokens or parts of the infrastructure supporting the market.
The argument is less about making gold sound futuristic and more about making an old market easier to move. As the FCA is expected to put it, “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.”
That matters particularly in London, where gold is already a heavyweight of the global financial system. The World Gold Council estimates that the city accounts for close to 70% of worldwide gold trading volumes, while China is developing a competing bullion hub and looking to attract some of those flows.
Tokenized Gold Could Put London’s Bullion Vaults to Work
The biggest tokenized gold products currently operating are not issued inside the UK’s regulatory perimeter. Tether Gold, or XAUT, represents about $2.63 billion in distributed asset value, while Pax Gold, or PAXG, represents roughly $1.87 billion, according to RWA.xyz.
Trading activity has also been picking up. Over a 30-day period, monthly transfer volume reached $3.70 billion for XAUT and $1.61 billion for PAXG, increases of 10.91% and 14.10%, respectively.
For London, the more intriguing possibility may be what happens beyond retail trading. The FCA’s proposal could help make the city’s physical gold reserves more useful as collateral in digital financial markets.
The Bank of England is also expected to consult later this year on whether clearing houses should be able to accept tokenized collateral. Separately, it is considering whether tokenized assets, including stablecoins, could be incorporated into its Sterling Monetary Framework, which supplies funding to financial institutions.
None of this is settled yet. FCA officials have stressed that no decisions have been made, and the eventual rules could look very different depending on how regulators draw the line.
The biggest question is who actually gets through that line. A future exemption could extend to retail buyers, or it could remain largely a wholesale tool for institutions using tokenized gold as collateral.
Either way, the proposal points to a curious collision between one of finance’s oldest physical assets and the internet’s favorite trick: turning something tangible into a transferable digital claim. London’s vaults may be full of metal, but the next fight is increasingly about how easily that metal can move without ever leaving the building.