FCA Considers New Regulatory Framework for Tokenized Gold to Strengthen London's Market Position

The FCA's initiative could redefine regulatory frameworks, impacting the efficiency and competitiveness of London's gold market.

• On September 14, 2026, the FCA announced a Call for Input regarding a bespoke regulatory regime for tokenized gold.
• The initiative aims to assess whether existing rules for collective investment schemes (CIS) and alternative investment funds (AIF) are suitable for tokenized gold products.
• Feedback is being sought until October 23, 2026, to inform potential policy changes that could enhance London's position in global gold trading.

• London dominates global gold trading, accounting for approximately 70% of notional volume, but faces rising competition from China.
• Regulatory uncertainty has emerged around tokenized gold's classification under existing CIS/AIF frameworks, prompting the FCA's review.
• The FCA's consultation is part of broader UK efforts to advance tokenization in financial markets, aiming to improve transferability and collateral utility.

The FCA's exploration of a bespoke regulatory regime for tokenized gold is a strategic response to the evolving landscape of financial markets and the increasing prominence of digital assets. Historically, London has been the epicenter of gold trading, but its dominance is under threat from emerging markets, particularly China, which is rapidly expanding its influence in the gold sector. By considering targeted exemptions from existing CIS and AIF rules, the FCA aims to create a more favorable environment for tokenized gold products, which represent ownership of physical bullion.

Tokenization offers several advantages, including enhanced transferability, divisibility, and the potential for these assets to be used as collateral in financial transactions. However, the current regulatory framework may not adequately address the unique characteristics of tokenized gold, leading to uncertainty among market participants. The FCA's Call for Input seeks to clarify these issues and explore options such as new classifications or a full bespoke regime tailored to the needs of the gold market.

FCA Director Jon Relleen has emphasized the importance of assessing the fit of these regulatory changes to boost the UK's competitiveness in the global gold market. The consultation process, which runs until October 23, 2026, invites feedback from industry stakeholders, ensuring that the perspectives of those directly involved in the market are considered in shaping future policies.

This initiative is not occurring in isolation; it aligns with broader UK regulatory efforts to embrace tokenization across various financial sectors. The Bank of England is also examining the role of tokenized assets as collateral within monetary frameworks, indicating a coordinated approach among key financial institutions in the UK.

As the FCA moves forward with this consultation, the implications for market participants could be significant. If successful, the proposed regulatory changes could enhance the attractiveness of tokenized gold products, potentially leading to increased investment and trading activity in London. This would not only reinforce London's status as a global gold trading hub but also set a precedent for how other jurisdictions might approach the regulation of digital assets.

• Gold traders: They may benefit from clearer regulations and increased market activity.
• Investors in tokenized assets: They could see improved liquidity and usability of their investments.
• Regulatory bodies: They will need to adapt to new frameworks and ensure compliance.
• Financial institutions: Banks and other entities may explore new collateral options and investment products.

• Feedback from industry stakeholders: Their responses to the Call for Input will shape the direction of regulatory changes and indicate market sentiment.
• Developments in competing markets: Observing how China and other countries respond to the UK's regulatory moves could provide insights into global market dynamics.
• Implementation of new regulations: If the FCA adopts new frameworks, monitoring their impact on trading volumes and market behavior will be crucial.