FCA Weighs Exemption for Tokenized Gold Amid London's Rivalry with China

The Financial Conduct Authority (FCA) is considering exempting tokenized gold from certain investment rules in the UK, which could make it easier for people to buy and sell digital gold.

Tokenized gold gives investors a claim on physical gold bars stored in vaults. However, uncertainty over whether these assets fall under existing collective investment scheme (CIS) or alternative investment fund (AIF) rules has hindered their development.

The FCA believes that allowing tokenized gold to be traded more freely could unlock London's bullion reserves for use as collateral and help the city maintain its position as a global hub for gold trading. According to the World Gold Council, London accounts for around 70% of global gold trading volumes.

The move could also benefit companies such as Tether Gold (XAUT) and Pax Gold (PAXG), which are two leading gold tokens issued outside the UK perimeter. The FCA will work with the Treasury on a targeted exemption from existing rules, which would cover certain gold tokens or gold market infrastructure.

The exact scope of any exemption is still unclear, but it's likely to be limited to wholesale buyers rather than retail investors. The Bank of England will also consult later this year on whether to allow clearing houses to accept tokenized collateral and add tokenised assets, including stablecoins, to its Sterling Monetary Framework.