FCA in talks with major banks on tokenized gold framework. London handles 70% of global gold trade. Tokenized gold could serve as collateral in OTC derivatives, securing London's edge against Shanghai and Hong Kong.
The Financial Conduct Authority is in active discussions with major banks on a regulatory framework for tokenized gold, the Financial Times reported. The goal is to let digital tokens backed by physical gold serve as collateral in wholesale markets, particularly uncleared OTC derivatives.
London handles about 70% of global gold trading. Competition from Shanghai and Hong Kong is rising. The FCA wants to prevent the city from losing its edge.
The push builds on a May 18, 2026 joint paper from the FCA, Bank of England, and Prudential Regulation Authority. That paper named tokenized gold as a collateral candidate under UK EMIR rules, alongside tokenized money-market funds. Both would receive the same prudential treatment as their traditional equivalents. Industry feedback on the paper closed in early July. The FCA is expected to publish a feedback statement before the end of summer, with further collateral policy and a cross-authority tokenization roadmap due later in 2026.
Tokenized gold brings efficiency gains. Near-instant 24/7 collateral mobilization and automated margin call processing reduce settlement friction on OTC derivatives. These features matter more as markets move toward programmable finance. Static collateral systems are becoming a liability.
Institutional players are already moving. Aviva Investors launched a tokenized USD liquidity fund on XRPL. BNY's 24/7 tokenized US Treasuries settlement shows the infrastructure for always-on digital settlement exists. The question for gold is whether the regulatory wrapper arrives fast enough.
Clear tokenized gold standards could pull institutional issuance, custody mandates, and DeFi-TradFi integration toward London. That is a meaningful moat, and right now it is still London's to build. The regulator does not currently oversee physical gold trading – that market is unregulated in the UK – but it supervises gold-related derivatives and listed gold-linked products.
Risks remain. Custody and audit standards for tokenized gold require careful design around legal title, proof-of-reserve auditing, and smart contract security. Gold price volatility also adds complexity to collateral stress-testing.
The timeline points to formal consultation into 2027, with the broader UK tokenization roadmap expected to crystallize by the end of 2026. The FCA's feedback statement later this summer will be the first real signal of how fast the framework will move.
Tokenized stocks are already approaching the $2 billion market cap mark, and the UK's Digital Securities Sandbox remains one of the most advanced testbeds globally. Gold could follow the same path once London's standards are clear.
Related reading: Tokenized QQQ drove 288% of July volume; Robinhood Chain bets on it.
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