UK’s FCA to regulate tokenized gold to preserve London’s place as the top hub for bullion
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Summary
The UK's Financial Conduct Authority (FCA) is developing regulations for tokenized gold as part of a broader digital asset strategy. This effort aims to preserve London's position as the leading global hub for gold trading by exploring how tokenized gold, which represents ownership of physical bullion, could be used as collateral in wholesale markets. The FCA is currently consulting financial institutions and plans to announce further details on its approach soon.
Why it matters
The FCA’s move aligns with the UK government's broader goal of digitizing financial markets, which officials estimate could add tens of billions of pounds to the economy annually. Given London's historical dominance—accounting for 70% of the world’s gold trading volume—the regulation of tokenized gold is viewed as a strategic step to maintain the city’s market leadership amid growing competition from China.
Key context
London’s over-the-counter gold market has long been the top global center for gold trading. Tokenized gold involves issuing digital tokens backed by physical gold, allowing ownership rights to be represented digitally. The FCA and the Bank of England have been discussing financial market digitization since May, with plans for modernization and tokenization of wholesale markets. The U.K. Treasury also outlined a 12-month plan in July to accelerate this digitization, projecting substantial economic benefits.
Key numbers and entities
The FCA is the main regulatory body leading the initiative. London currently accounts for 70% of the global notional gold trading volume as reported by the World Gold Council. The U.K. government projects a potential annual economic boost of £33 billion (approximately $44 billion) from financial market digitization. Gold prices mentioned include an all-time high near $5,595 per troy ounce in January and a current price around $4,340 per troy ounce.
What remains unclear
The FCA has not yet finalized the regulatory framework and will engage further with industry stakeholders. Specific details about how tokenized gold will operate as collateral or other market applications are still under consultation. The FCA spokesperson indicated that their tokenization efforts do not target any particular retail use case but are intended to address broader market developments.