The United Kingdom is considering whether certain tokenized gold products should be given exemptions from existing fund rules, in a move that could help bring more physical bullion into the digital economy.
The Financial Conduct Authority (FCA) is seeking industry views on whether gold-backed digital tokens should fall outside some collective investment scheme and alternative investment fund requirements.
The review covers tokenized products backed by physical gold, with a focus on those offering transparent backing, clearly defined ownership rights, and dependable redemption mechanisms.
The consultation will remain open until Oct. 23. Its outcome could lead to clearer regulatory guidance, specific exemptions or a dedicated framework for tokenized gold, amid FCA concerns that uncertainty over UK fund rules could hinder the development of certain applications.
Tokenized Gold Could Make Bullion Easier to Use
Tokenized gold refers to digital tokens that represent ownership of physical gold held by an issuer or custodian. While the underlying metal remains stored in secure vaults, ownership can be transferred electronically through the tokens.
The FCA is examining whether this structure could make gold more efficient to trade, transfer, and hold. It could also allow bullion to be used more easily as collateral in financial transactions without requiring physical bars to be moved between parties.
The regulator is particularly interested in products with clear ownership rights, transparent backing, and reliable redemption arrangements.
Unclear Fund Rules Could Limit Adoption
A major issue is uncertainty over whether some tokenized gold products fall within the UK’s collective investment scheme or alternative investment fund rules.
The FCA said this uncertainty could affect whether certain investors are willing or permitted to hold the tokens. If products are treated like conventional investment funds despite representing direct ownership of allocated physical gold, their use in wholesale markets could become more complicated.
Jon Relleen, the FCA’s director of infrastructure and exchanges, said tokenized gold had emerged as a point of interest in talks with market participants.
Regulators Are Considering Several Solutions
No final decision has been made, and UK authorities are considering several possible approaches. These could include clarifying existing rules, creating a recognized classification for specific regulatory purposes, or introducing targeted changes to rules or legislation.
The FCA is also considering whether a bespoke framework for tokenized gold, or tokenized commodities more broadly, could be appropriate.
Any potential exemption is expected to be limited. Tokenized gold would still need to comply with other requirements involving custody, market integrity, and financial crime controls.
Tokenized Gold Fits into a Bigger UK Strategy
The review is part of a broader effort by the FCA and Bank of England to encourage tokenization across wholesale financial markets.
Regulators said collateral was the most frequently mentioned use case in response to their earlier consultation, with tokenized gold, money market funds and stablecoins among the assets attracting interest.
The authorities plan to publish a tokenization roadmap later this year, outlining key workstreams and target dates.
For London’s financial sector, the development of a clearer framework could help unlock new uses for the city’s large bullion market while supporting the UK’s wider push toward digital financial infrastructure.
