UK Regulators Plan Tokenized Gold Rules

The UK's Financial Conduct Authority (FCA) is preparing a regulatory framework for tokenized gold, which could be used as collateral in wholesale markets. The FCA has held talks with banks and other industry participants over potential rules for tokenized gold.

The FCA is seeking feedback on the use of tokenized gold as collateral in wholesale markets. This move is part of a broader push to expand tokenized financial markets in the UK. London is the world's largest over-the-counter gold trading hub, accounting for about 70% of global notional gold trading volume.

The UK government-backed industry task force estimates that tokenization could add up to 33 billion British pounds ($44 billion) to the UK's annual economic output by 2035. The FCA is expected to announce progress on drafting new rules for tokenized digital assets within the next few months.

## Why it matters The UK's financial watchdog is preparing rules for tokenized gold as part of its digital asset strategy to ensure London maintains its status as the top global hub for the trade of the precious metal. The initiative aligns with a wider UK push to digitize financial markets, which officials say could add tens of billions of pounds to annual economic output. London's dominance in gold trading is being increasingly challenged by China, making it essential for the UK to adapt to the changing landscape.

The tokenization of gold is the process by which digital tokens are created to represent ownership rights in physical gold, with the token issuer holding the gold as backing. Chris Woolard, the UK Treasury's wholesale digital markets lead, laid out a 12-month plan in July to speed up the digitization of the country's financial markets. The roadmap also calls for the UK's first tokenized government bond by early 2027 and seeks to make tokenized securities usable for trading, settlement, and as collateral.

The FCA's move to regulate tokenized gold is a significant step towards achieving this goal. By providing a clear framework for the use of tokenized gold as collateral, the FCA aims to foster market growth and maintain London's position as a leading global financial hub.