FCA explores tokenized gold rules for wholesale markets and collateral use as London defends 70% global bullion share against China's rising ambitions.
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The Financial Conduct Authority is exploring how tokenized gold could fit into wholesale markets, including its use as collateral. The discussions come as London seeks to defend its dominance in bullion trading against growing competition from China.
The FCA has held early talks with banks and other industry participants about how tokenized gold could be regulated and used in institutional markets, the Financial Times reported. A regulatory announcement could come within the next few months, people familiar with the discussions said.
Tokenized gold represents ownership rights in physical bullion through blockchain-based tokens. The underlying gold is typically held in custody by the issuer. The FCA has been seeking industry feedback on whether such assets could be accepted as collateral in wholesale finance.
London currently accounts for about 70% of global gold trading volumes, according to the World Gold Council. But Shanghai and Hong Kong are competing for a larger share of wholesale activity. The challenge for regulators is jurisdictional. The FCA does not oversee physical gold trading directly, although it regulates gold derivatives and exchange-traded products listed on public markets.
Earlier this year, the FCA and the Bank of England's Prudential Regulation Authority said they would publish further proposals on how tokenized collateral could operate within existing rules. Tokenized gold fits into a wider government effort to bring blockchain technology into trading, settlement, clearing and custody. The U.K. recently published a joint statement with the U.S. on stablecoin rules to boost cross-border payments through their Transatlantic Taskforce for Markets of the Future.
Commercial adoption is already emerging. HSBC launched a tokenized gold product for retail customers in Hong Kong more than two years ago. The bank said over $2.2 billion has since traded across more than 276,000 transactions. The World Gold Council has argued that digital gold could remove constraints linked to bar sizes, vault locations and fragmented settlement systems.
Gold itself remains volatile. Prices reached a record near $5,595 an ounce in January before retreating to about $4,380 as of Aug. 10.
For London, the regulatory question is becoming more strategic. Tokenization is no longer only about efficiency. It may also determine where the next generation of global gold trading takes place.
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