UK Financial Conduct Authority Develops Regulatory Framework for Tokenized Gold Trading

The UK Financial Conduct Authority is holding early discussions with major banks to develop a regulatory framework for tokenized gold. London currently processes 70% of global gold trading, but faces intense competition from Asian hubs like Hong Kong and Shanghai, which are expanding their digital clearing infrastructures. To defend its dominance, the UK is exploring tokenized gold as collateral in wholesale markets. This effort is part of a broader digitization push, including the Digital Securities Sandbox and a planned tokenized government bond by early 2027, which could boost the UK economy by £33 billion by 2035.

FCA tokenized gold regulatory framework

• ▪The UK Financial Conduct Authority has held early discussions with major banks and industry participants regarding the regulation of tokenized gold.
• ▪The Financial Conduct Authority is expected to announce plans to develop regulatory standards for tokenized gold within the next few months.
• ▪The Financial Conduct Authority does not directly regulate physical gold trading in Britain, but it maintains jurisdiction over gold-based derivatives and exchange-traded products.

London bullion market competition

• ▪London handles approximately 70% of global gold trading volume, making it the world's largest over-the-counter gold trading hub.
• ▪Hong Kong is building a government-owned gold-clearing system, run by the Hong Kong Precious Metals Central Clearing Company, which targeted a July 2026 launch.
• ▪Hong Kong and Shanghai are expanding their roles in wholesale gold trading, with the Hong Kong Precious Metals Central Clearing Company signing a memorandum of understanding with the Shanghai Gold Exchange in January 2026.

Tokenized gold collateral use cases

• ▪The Financial Conduct Authority and the Bank of England are reviewing tokenized gold and tokenized Money Market Funds for eligibility as uncleared over-the-counter derivatives collateral.
• ▪HSBC has operated a retail tokenized gold product in Hong Kong for over two years, processing more than $2.2 billion across over 276,000 transactions.

UK wholesale market digitization strategy

• ▪Sixteen financial institutions are currently testing live tokenized asset infrastructure through Britain's Digital Securities Sandbox, jointly overseen by the FCA and the Bank of England.
• ▪The UK government is targeting the launch of its first tokenized government bond, a digital gilt pilot named DIGIT, by early 2027 using HSBC's Orion platform.
• ▪A government-backed industry task force estimates that financial asset tokenization could add £33 billion ($44 billion) to the UK's annual economic output by 2035.