The UK Financial Conduct Authority is considering exempting some tokenised gold products from collective investment scheme (CIS) and alternative investment fund (AIF) rules as regulators examine how digital bullion could be used across London’s wholesale financial markets.
The FCA will outline potential changes on Monday as part of work with the Treasury and Bank of England on whether tokenised gold, or tokenised commodities more widely, require a dedicated regulatory framework. No decision has been made and officials remain open to other approaches.
Tokenised gold represents ownership of physical bullion held by an issuer or custodian. The digital tokens can be transferred between investors while the underlying gold remains in storage.
Market participants have told the FCA that uncertainty over whether such products fall within the CIS and AIF frameworks could limit investor access. A possible response is a targeted exemption covering certain products or related market infrastructure.
Jon Relleen, the FCA’s director of infrastructure and exchanges, said tokenised gold had become an area of interest in discussions with industry.
“We’re keen to understand whether existing regulatory frameworks remain the right fit for gold markets and how innovation could strengthen the efficiency and competitiveness of UK markets,” he said.
The regulator is also assessing whether tokenisation could make bullion easier to divide, transfer and use as collateral. Unlike shares and debt securities, gold remains a physical asset requiring storage, custody and the movement of bars.
The UK accounts for around 70% of global gold trading volumes, according to the World Gold Council, while China is seeking to strengthen its position as a bullion trading centre.
Products including Tether Gold and Pax Gold already issue blockchain-based tokens backed by physical bullion. Their combined market capitalisation was roughly $4.4 billion in July. Under the European Union’s Markets in Crypto-Assets regulation, gold-backed tokens are classified as asset-referenced tokens, although no such token had been approved under the regime as of July.
The FCA and Prudential Regulation Authority have previously identified tokenised gold as a possible collateral asset for uncleared over-the-counter derivatives. By late August, Aave’s $25 million borrowing ceiling against Tether Gold had been fully used, while Arch Lending had begun accepting PAXG and XAUT for loans at loan-to-value ratios of up to 75%.
The proposed reforms would focus on the UK wholesale market and London’s existing bullion infrastructure. Regulators believe tokenisation could allow reserves to be divided and transferred digitally, reducing some of the operational work involved in moving physical bars.
The Bank of England is separately considering whether tokenised assets, including stablecoins, could qualify as collateral under its Sterling Monetary Framework. It plans to consult later this year on whether central counterparty clearing houses should be allowed to accept tokenised assets.
A separate FCA and Bank of England paper on wholesale-market tokenisation is also expected on Monday. Their work includes securities, collateral, settlement and post-trade infrastructure. Sixteen firms were participating in the UK Digital Securities Sandbox when regulators opened a joint consultation in May, including proposals for longer operating hours and settlement systems operating close to around the clock.
The wider programme includes a first digital sovereign bond. The government selected HSBC’s Orion platform in July, with the first Digital Gilt Instrument targeted for issuance by the end of the first quarter of 2027.
Bank of England Deputy Governor Sarah Breeden said in May that future UK payment infrastructure could support tokenised bank deposits, regulated stablecoins and potentially a digital pound.
Any exemption for tokenised gold would require further work with the Treasury before changes to the regulatory perimeter could take effect.
