The FCA is setting standards for tokenized gold as OTC collateral, adapting existing rules to digital bullion. London vaults hold $1.384 trillion in gold. An announcement could come within months.
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The Financial Conduct Authority is close to setting standards for tokenized gold used as collateral in wholesale markets, a step that could tie digital assets to London's existing gold vaults.
The regulator has been debating rules with major banks and other participants, the Financial Times reported Monday. The working model would adapt existing wholesale-market rules to tokenized gold rather than create a new regulatory category, the FT said, citing people familiar with the discussions.
Tokenized gold is a digital token that represents ownership of physical bullion held in custody. Allowing these tokens to serve as collateral for uncleared over-the-counter derivatives would let banks use digital assets inside their normal trading and risk-management systems.
The talks build on a May 18 policy paper from the FCA, the Bank of England and the Prudential Regulation Authority. That document identified tokenized bullion as potential collateral for uncleared OTC derivatives. The PRA has since said tokenized assets could receive prudential treatment equivalent to their conventional counterparts where the underlying legal rights and risks match.
The UK already has a template. In an April policy statement, the FCA confirmed that money market funds, including their tokenized versions, can qualify as collateral for uncleared trades under UK EMIR rules.
Announcement timing is not fixed. The FT reported, citing a person familiar with the plans, that standards could come within the next few months.
Sixteen firms are now running live issuance and settlement experiments through the government-backed Digital Securities Sandbox. The Bank of England is targeting 2027 for upgrades to its collateral infrastructure and 2028 for a service connecting digital-asset ledgers with sterling central bank money.
London's physical gold infrastructure is large. LBMA data show London vaults held 9,339 tonnes of gold worth roughly $1.384 trillion at the end of March. London handles about 70% of global gold trading, the FT reported, even as Asian financial centres gain ground.
The World Gold Council is also working on a wholesale tokenized gold structure called "Pooled Gold Interests," aimed at institutional investors.
If the FCA formally recognizes tokenized gold as eligible collateral, banks and institutions would have a clearer path to using digital bullion inside existing systems. The discussions are early, and the FCA has not finalized a framework.
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