FCA Tees Up Tokenized Gold Framework with Major Banks

The UK Financial Conduct Authority (FCA) is working on establishing standards for tokenized gold with major banks and other market participants. The discussions are aimed at creating a regulatory framework that would support the use of digital representations of physical gold as collateral in wholesale markets.

The FCA's efforts build on a joint policy paper published by the FCA, Bank of England, and Prudential Regulation Authority in May, which identified tokenized gold as a possible form of collateral for uncleared over-the-counter derivatives. The regulator is reviewing tokenized collateral eligibility and recognizes potential benefits from tokenized money market funds and tokenized gold.

The London Bullion Market Association (LBMA) data show that London vaults held 9,339 tonnes of gold valued at about $1.384 trillion at the end of March. The World Gold Council is also developing a wholesale digital gold structure known as Pooled Gold Interests, which combines physical ownership with digital transfer.

The FCA and Bank of England closed their broader tokenization consultation on July 3, and an announcement on developing tokenized gold standards is expected within the next few months. The regulatory work centers not only on whether an asset is digital but also whether its legal rights, custody arrangements, and risks remain comparable with the conventional asset it represents.