The Financial Conduct Authority (FCA) has signalled that it is actively reviewing the regulatory treatment of tokenised gold, with a view to creating a special exemption that would remove this emerging asset class from the conventional fund rules that currently apply to traditional investment vehicles. This move is being pursued in close collaboration with Her Majesty’s Treasury, and the primary goal is to preserve and strengthen the United Kingdom’s position as a leading global hub for the trading, custody and distribution of gold‑backed digital assets. Tokenised gold – essentially a digital representation of physical gold that is recorded on a blockchain – has attracted considerable interest from both institutional investors and retail participants over the past few years. By converting physical gold into a token, market participants can enjoy many of the benefits associated with blockchain technology, such as near‑instant settlement, fractional ownership, increased transparency, and the ability to trade across borders without the friction of traditional clearing and settlement processes.
At the same time, the underlying asset remains a tangible, universally recognised store of value, which gives tokenised gold a unique appeal that bridges the worlds of traditional commodities and modern fintech. However, the regulatory landscape for tokenised assets remains fragmented and, in many cases, uncertain. Under the current framework, funds that hold tokenised gold would be subject to the same rules that apply to conventional collective investment schemes, including requirements around diversification, liquidity, valuation, and reporting. These rules were drafted with traditional securities and commodities in mind and do not necessarily reflect the operational realities of a blockchain‑based token.
For example, the valuation of a gold token can be derived directly from the price of the physical gold it represents, which is published continuously on global markets, whereas the existing fund rules often require periodic independent valuations that can be costly and time‑consuming. Recognising these challenges, the FCA has begun to explore a bespoke regulatory regime that would effectively carve out tokenised gold from the standard fund legislation. The proposed exemption would allow firms that issue, manage or custody tokenised gold to operate under a lighter, more proportionate set of requirements that are tailored to the specific risk profile of the asset. Such a framework could include: * A clear definition of what constitutes a "tokenised gold" product, including criteria around the custody of the underlying physical metal, audit standards, and the transparency of the token issuance process.
* Streamlined valuation rules that rely on real‑time market prices for physical gold, reducing the need for costly independent valuations while still ensuring that investors receive an accurate and up‑to‑date view of their holdings. * Adjusted liquidity provisions that reflect the high liquidity of gold markets, while also addressing the technical aspects of token settlement and the potential for blockchain‑based trading platforms to provide continuous market access.
* Tailored reporting and disclosure obligations that focus on the custodial arrangements, the provenance of the physical gold, and the security of the blockchain infrastructure, rather than the broader reporting regime designed for traditional funds. * A proportionate supervisory approach that leverages the FCA’s existing expertise in both financial markets and emerging fintech, allowing regulators to monitor tokenised gold activities without imposing undue burdens on innovators. The rationale behind this initiative is two‑fold.
First, by offering a clear, purpose‑built regulatory pathway, the FCA hopes to attract more issuers and investors to the UK market, reinforcing London’s reputation as a world‑class centre for gold trading and fintech innovation. Second, an exemption would mitigate the risk that overly stringent or ill‑fitting regulations could push tokenised gold activity to other jurisdictions that are more welcoming to digital assets, thereby eroding the UK’s competitive advantage.
Industry participants have largely welcomed the prospect of a tailored regime. Asset managers see the potential for tokenised gold to be incorporated into diversified portfolios without the administrative overhead that current fund rules impose.
Custodians and vault operators view the exemption as an opportunity to expand their services into the digital realm, offering secure storage of both physical gold and its digital counterpart. Meanwhile, fintech firms that specialise in blockchain infrastructure see a clearer path to scaling their platforms, knowing that regulatory expectations will be aligned with the technology they employ. Nevertheless, the FCA is also mindful of the need to protect investors and maintain market integrity. Any exemption will be accompanied by robust safeguards, such as stringent audit requirements for the physical gold reserves, mandatory segregation of client assets, and rigorous cybersecurity standards for the blockchain networks used.
The regulator is also likely to require that token issuers maintain a clear chain of custody and provide regular, transparent reporting to both investors and supervisory authorities. The consultation process is expected to be open and collaborative. The FCA plans to publish a detailed discussion paper outlining the proposed exemption, the criteria that would apply, and the supervisory expectations for firms operating in this space. Stakeholders—including banks, asset managers, custodians, fintech companies, and consumer groups—will be invited to submit feedback, ensuring that the final rules strike an appropriate balance between innovation and protection.
If the exemption is implemented, it could have a ripple effect across the broader digital asset ecosystem. Other tokenised commodities, such as silver or platinum, may seek similar treatment, and the FCA’s approach could serve as a template for how regulators worldwide handle blockchain‑based representations of physical assets. Moreover, a clear regulatory pathway for tokenised gold could encourage the development of new financial products, such as gold‑backed stablecoins, tokenised exchange‑traded funds (ETFs), and hybrid instruments that combine traditional securities with blockchain technology.
In summary, the FCA’s consideration of an exemption for tokenised gold reflects a proactive stance toward integrating innovative financial technologies into the existing regulatory framework. By working with the Treasury to craft a bespoke set of rules, the regulator aims to protect investors, preserve market integrity, and sustain London’s status as a premier global market for gold and digital finance.
The outcome of this initiative will be closely watched by market participants and regulators alike, as it may set the tone for how the UK and other jurisdictions approach the regulation of tokenised assets in the years to come.