Banks and other market players have been quietly meeting with Britain’s Financial Conduct Authority (FCA) to hash out what a regulatory framework for tokenized gold might look like. As per media reports, the discussions go well beyond basic supervision, touching on whether gold-backed tokens could serve a functional role as collateral within wholesale markets.
Interestingly, the FCA’s authority here has a built-in limit— the agency has no direct oversight of physical gold trading, its remit only extends to gold derivatives and exchange-traded products. Cointelegraph contacted the regulator for comment on the matter, but it declined to respond to the Financial Times’ inquiry. Industry watchers expect the FCA to lay out concrete proposals within the coming months.
Margin requirements are the real reason brokers are paying attention. Both the FCA and the Prudential Regulation Authority are weighing whether tokenized gold should be treated as acceptable collateral for uncleared over-the-counter derivatives trades, the kind of asset that gets posted daily alongside cash and government bonds, rather than remaining just another product firms sell to their clients.
A parallel track of work is underway at the Bank of England, which is studying whether tokenized versions of assets already recognized as eligible collateral could be used at central counterparties operating under UK EMIR. This builds on a joint call for input the Bank of England and FCA published on May 18, flagging the potential upside of both tokenized money market funds and tokenized gold serving as OTC collateral, provided the industry helps shape workable standards. Input on the paper closed July 3.
Back in April, the FCA had issued a policy statement confirming that certain money market funds, including tokenized variants, qualify as collateral for uncleared trades under United Kingdom European Market Infrastructure Regulation (UK EMIR), giving regulators a template to build from. Later this year, the Bank of England also intends to publish additional guidance on how tokenized collateral can function within the current rulebook, and a specific discussion covering assets already accepted by clearing houses is slated for the third or fourth quarter.
Both regulators are working toward a finalized roadmap by year’s end, with the bulk of formal rule changes expected to go out for public consultation sometime in 2027.
The move assumes significance as London still commands roughly 70% of global notional gold trading volume, making it by far the world’s largest over-the-counter gold market, per World Gold Council figures.
Meanwhile, a government-backed task force projected in July that tokenization initiatives could generate up to around $44 billion, in additional annual economic output for Britain by 2035.
