UK FCA proposes exempting tokenized gold from fund regulations

The UK Financial Conduct Authority is consulting on plans to exempt tokenized gold from collective investment scheme and alternative investment fund rules. This initiative aims to preserve London's dominant position as a global bullion hub, where it currently handles 70% of trading volume, amid rising competition from China. Regulators believe tokenization will make physical gold easier to divide, transfer, and utilize as collateral, unlocking liquidity in wholesale financial markets.

FCA tokenized gold exemption proposal

• ▪The Financial Conduct Authority's consultation on tokenized gold is open for industry feedback until October 23, 2026
• ▪The UK Financial Conduct Authority published a call for input on September 14, 2026, seeking feedback on whether certain tokenized gold products should be exempt from fund regulations
• ▪The Financial Conduct Authority is considering a bespoke regulatory regime for tokenized gold or tokenized commodities in cooperation with the UK Treasury and the Bank of England

UK gold market competitiveness

• ▪UK regulators are proposing tokenized gold reforms to defend London's dominant position in bullion trading against growing competition from China
• ▪Jon Relleen, the Financial Conduct Authority's director of infrastructure and exchanges, stated that the regulator is evaluating whether existing regulatory frameworks remain appropriate for gold markets
• ▪London accounts for approximately 70% of global over-the-counter gold trading volume, according to the World Gold Council

Collective investment scheme classification uncertainty

• ▪Market participants warned that uncertainty over whether tokenized gold falls under collective investment scheme or alternative investment fund rules could restrict investor access and hinder development
• ▪The Financial Conduct Authority may work with the UK Treasury to introduce a targeted exemption from the collective investment scheme and alternative investment fund perimeter for specific tokenized gold products

Tokenized gold collateral applications

• ▪The Financial Conduct Authority stated that tokenization could make physical gold easier to divide, transfer, and utilize as wholesale collateral across digital markets
• ▪The Bank of England is considering including tokenized assets, including stablecoins, as eligible collateral in its Sterling Monetary Framework
• ▪The Bank of England plans to consult later in 2026 on allowing central counterparty clearing houses to accept tokenized assets as collateral

Existing tokenized gold products

• ▪Tether Gold backs $2.63 billion in distributed asset value and Pax Gold backs $1.87 billion, with both leading tokenized gold products issued outside the UK regulatory perimeter
• ▪Monthly transfer volumes reached $3.70 billion for Tether Gold and $1.61 billion for Pax Gold, representing 30-day increases of 10.91% and 14.10% respectively

Debatable claims

• ▪The Bank of England should accept tokenized assets as collateral
• ▪The UK should exempt tokenized gold from fund regulations