London still accounts for roughly 70% of global gold trading, according to World Gold Council figures cited by the Financial Times, but Shanghai and Hong Kong are expanding their role in wholesale trading. That competitive pressure is pushing the UK to reconsider bullion market infrastructure that has changed relatively little, while other financial centers invest in more digital market systems.

The UK's Financial Conduct Authority (FCA) has been discussing how digital representations of physical bullion could operate in wholesale markets, including their potential use in margin and other institutional transactions. Industry standards could be announced within the coming months, according to the reporting.

Tokenization Could Change How Gold Moves

Gold already trades extensively without physical bars changing hands after every transaction. Much of London's wholesale market operates through claims on vaulted bullion, with ownership and settlement handled through established banking and custody networks.

Tokenization would place a digital layer over that existing structure. A claim linked to vaulted bullion could be transferred and tracked digitally while preserving its connection to the physical metal.

The World Gold Council has been exploring a similar model through its Wholesale Digital Gold initiative. Its proposed Pooled Gold Interests structure would give investors beneficial ownership in pooled vaulted gold while allowing those interests to move in smaller digital units.

For institutions, the potential value becomes clearer when gold needs to move between counterparties. A transferable digital claim could simplify its use during margin calls, liquidity operations, and other wholesale transactions that currently pass through several layers of market infrastructure. That would give bullion a more active role in financial markets without requiring the underlying asset to change.

The Real Test Comes After Gold Goes Digital

Creating a digital representation of bullion is relatively straightforward. The more difficult question is whether a regulated institution can depend on that representation when money or collateral is actually at risk.

A bank accepting tokenized gold needs to know that the digital record corresponds to an enforceable claim on the underlying metal. Custody arrangements must remain clear. Redemption rights have to survive disputes. Settlement needs to be final, and investors need to know what happens to their assets if an intermediary fails. Without those protections, faster transfer technology does little to improve gold's usefulness in institutional finance.

The FCA's work is therefore centered on the standards surrounding the token rather than the act of creating one. The aim is to establish how digitally represented bullion can be structured and used within regulated financial activity, as outlined in the FCA's call for input on the future of tokenisation in UK wholesale markets.

Existing retail gold-backed tokens would not necessarily fit that model. The reporting gives no indication that regulators have selected a blockchain, token standard, or existing crypto issuer.

The Bank of England Has a Different Job

The Bank of England is examining tokenization through the lens of financial stability, settlement, and market resilience. Its role overlaps with the FCA's work, but the questions are different. While the FCA deals with the framework under which regulated firms and products operate, the Bank must consider what happens when tokenized assets become part of financial infrastructure used at scale.

The Bank has previously argued that tokenized systems could improve how institutions move assets for margin and liquidity management. It has also stressed that faster technology cannot compensate for weak ownership rights or infrastructure that fails during periods of market stress.

Those concerns are already being explored through the UK's Digital Securities Sandbox, jointly overseen by the FCA and the Bank of England. Sixteen firms have passed the first stage of the program, which allows participants to develop infrastructure for issuing, trading, and settling digital securities under modified regulatory requirements.

That work is already moving toward live-market applications. A government-backed industry group is targeting a live tokenized repo trial in 2027, another sign that the UK wants digital assets to move beyond isolated pilots and into wholesale financial activity.

The Bank has also opened a route for qualifying stablecoins to be considered for wholesale settlement within the sandbox on a case-by-case basis.

Gold Could Become Part of a Larger Digital Market

Stablecoins and tokenized bullion would serve different roles within that emerging infrastructure. A stablecoin can act as a digital settlement asset. Tokenized bullion could provide transferable value backed by an asset that is already widely held across institutional portfolios and reserve systems.

If both can eventually operate across compatible infrastructure, tokenization starts to look less like a collection of standalone blockchain products and more like a market where traditional assets can be issued, transferred, pledged, and settled digitally.

For London, that matters because modernizing bullion infrastructure could help preserve the city’s central role in a market now facing deeper competition from Asian financial centers. For blockchain markets, the practical test is whether distributed-ledger systems can support an asset institutions already use at scale, with the legal and operational safeguards wholesale finance requires, rather than simply creating another digital token backed by gold.