UK FCA eyes tokenized gold to boost London wholesale market liquidity—Here's why it matters

The UK Financial Conduct Authority (FCA) has launched a formal consultation to examine whether tokenized gold should be exempt from rigid collective investment scheme (CIS) and alternative investment fund (AIF) regulatory frameworks.

Tokenized gold is physical gold bullion that has its ownership rights stored as digital tokens on a blockchain

London accounts for roughly 70% of global over-the-counter gold trading, holding vast physical reserves in subterranean vaults.

However, transferring physical gold bars or re-pledging bullion as collateral in wholesale markets remains operationally cumbersome.

By establishing clear, targeted exemptions or a dedicated regulatory framework alongside HM Treasury and the Bank of England, the FCA aims to allow market participants to divide, transfer, and trade digital representations of vaulted gold instantly on blockchain infrastructure.

Regulators and major financial institutions view tokenized bullion as a high-grade, liquid asset that can be seamlessly pledged as margin or collateral in real-time trading without physically moving heavy metal bars.

Current fund rules restrict institutional investors from holding digital commodity tokens due to regulatory uncertainty, but direct exemptions would grant major players essential legal clarity.

As competing financial jurisdictions vie for digital asset market share, modernizing the UK's legacy bullion architecture is designed to secure London's enduring position at the center of international wholesale market innovation.

The FCA said it will seek views on whether tokenizing gold could boost efficiency and competitiveness, while maintaining market integrity and protecting consumers until its October 23 deadline.

It also added that it was exploring gold tokenization ⁠in line with its wider work on the future of tokenization in UK wholesale financial markets and was looking at the potential for distributed ledger technology (DLT) to support new growth opportunities.

In May 2026, the FCA published a joint call for input with the Bank of England on the future of tokenization in UK wholesale markets.

Respondents raised gold specifically, reflecting London's position as the world's largest centre for ⁠spot gold trading.

The FCA said this feedback prompted it to explore tokenized gold in greater detail.

Market excerpts weigh, gold tokenization could make gold easier to transfer and use across digital markets, particularly as wholesale collateral, the FCA said, adding ⁠that it could also support new forms of retail investment and product innovation.

London is home to the world's largest over-the-counter gold trading hub, where participants ⁠trade directly with one another rather than via an exchange.

"We want to understand whether tokenization could strengthen the efficiency and competitiveness ⁠of UK wholesale markets while preserving the strengths of London's existing gold-market infrastructure," the FCA added.