Britain's Financial Conduct Authority (FCA) is holding early-stage discussions with major banks and other market participants over rules for tokenized gold, as the United Kingdom seeks to integrate digital representations of the precious metal into mainstream financial markets.

According to the Financial Times, the FCA is examining how tokenized physical gold could be deployed in wholesale markets, including as collateral for uncleared over-the-counter (OTC) derivatives. Tokenized gold refers to digital tokens that represent ownership of, or a claim on, physical gold held in custody. Enabling such assets to serve as collateral could streamline the integration of digital assets into banks' existing trading and risk-management systems.

While tokenized gold products such as Paxos' PAXG and Tether Gold's XAUT already trade on cryptocurrency exchanges, these have operated largely outside regulated banking and institutional collateral frameworks. The FCA's discussions signal an effort to bring tokenized bullion into the same regulatory perimeter as traditional wholesale-market instruments.

Building on Existing Collateral Framework

The talks build on a May 18 policy paper published jointly by the FCA, the Bank of England, and the Prudential Regulation Authority (PRA), which identified tokenized assets — including gold — as potential collateral for uncleared OTC derivatives.

Rather than establishing a new regulatory category, the approach under discussion would adapt existing wholesale-market rules to tokenized assets, the Financial Times reported. The PRA has indicated that tokenized assets could receive prudential treatment comparable to their conventional counterparts when the underlying legal rights and risks are similar.

The UK already has precedent in this area. In an April policy statement, the FCA confirmed that money market funds — including tokenized versions — can qualify as collateral for uncleared trades under UK EMIR regulations.

The Financial Times reported that an announcement on tokenized gold standards could emerge within the next few months, citing a person familiar with the plans.

The regulatory discussions coincide with the UK's broader expansion of digital securities infrastructure. Sixteen firms are currently participating in live issuance and settlement experiments through the government-backed Digital Securities Sandbox. The Bank of England is targeting 2027 for upgrades to its collateral infrastructure and 2028 for a service that would link digital-asset ledgers with sterling central bank money.

Other jurisdictions are pursuing similar initiatives. The European Union's Distributed Ledger Technology (DLT) Pilot Regime has been live since 2024, and the Monetary Authority of Singapore's Project Guardian has explored institutional tokenization use cases across asset classes including fixed income and foreign exchange.

London's Gold Market Positioning

The push for clearer rules comes as London seeks to defend its status as the world's leading gold-trading center. London accounts for roughly 70% of global gold trading, according to the Financial Times, though Asian financial centers are becoming increasingly competitive.

London's physical gold infrastructure is substantial in scale. London Bullion Market Association (LBMA) data show that London vaults held 9,339 tonnes of gold valued at approximately $1.384 trillion at the end of March.

Digital infrastructure could play an increasingly significant role in this market. Faster settlement, digital ownership records, and the ability to use tokenized bullion within existing financial systems could help bridge London's established gold market with the broader expansion of tokenized real-world assets, a category that has drawn interest from asset managers including BlackRock and Franklin Templeton.

The gold industry itself is developing tokenization initiatives. The World Gold Council is working on a wholesale tokenized gold structure called "Pooled Gold Interests," designed for institutional investors.

If tokenized gold is formally recognized as eligible collateral, banks and other institutions would have a clearer pathway to incorporating digital bullion into their trading and risk-management systems. This could help connect traditional commodities markets with digital-asset infrastructure, while providing London with an additional competitive tool in gold trading and settlement.

However, the discussions remain at an early stage, and the FCA has not yet finalized a regulatory framework for tokenized gold.