Regulatory framework and exemptions for tokenized gold

The UK Financial Conduct Authority is exploring whether certain tokenized gold products should be removed from or be granted exemptions to the collective investment scheme (CIS) and alternative investment fund (AIF) rulebooks, working alongside the Bank of England and HM Treasury. Regulators are assessing whether digital representations of bullion could make physical gold easier to divide, transfer and use as collateral in London’s wholesale markets. One option under consideration is a targeted exemption for some gold tokens or market infrastructure, though the FCA has made no final decision and remains open to different approaches.

The FCA frames tokenization as a way to digitalize an otherwise operationally complex physical asset, contrasting it with shares or debt securities that already move through mature electronic market infrastructure. London is central to the global bullion market, accounting for roughly 70% of global trading volumes according to the World Gold Council. Market incumbents have warned the FCA that uncertainty over whether tokenized gold falls within CIS or AIF perimeters could slow development and restrict investor access. The global market already includes offshore issuers such as Tether Gold (XAUT) and Pax Gold (PAXG); reporting cites combined market capitalizations of about $4.4 billion in July, with other figures showing XAUT backing $2.63 billion and PAXG $1.87 billion.

Regulatory work also looks at collateral and settlement. The Bank of England is considering whether tokenized assets, including stablecoins, could qualify as collateral under its Sterling Monetary Framework and plans a consultation on whether central counterparties should be allowed to accept tokenized collateral. The FCA and Bank cite industry feedback that tokenization could free capital by improving post-trade processes such as clearing and settlement, potentially reducing operational constraints that lead participants to hold excess collateral. The FCA will set out its proposals publicly, but any targeted exemption would require further work with the Treasury and broader consultation before changes to the regulatory perimeter could be introduced.

Proposals and price update

New reports say the proposal package will be presented on Monday, aiming to boost liquidity and help London stay competitive against China. The coverage adds a market price update: gold is reported trading between $4,281 and $4,329 per troy ounce, and that price band is now being referenced in discussions over how tokenized gold should be treated.

The Treasury and Bank of England remain involved in shaping any framework while regulators pursue measures to enhance market liquidity and usability.