The Financial Conduct Authority (FCA) has signalled that it is seriously considering a specialised regulatory pathway that would allow tokenised gold to operate outside the standard framework that governs collective investment schemes. This initiative is being pursued in close collaboration with Her Majesty's Treasury, with the overarching aim of preserving and strengthening London’s status as a global hub for innovative financial products. Tokenised gold, often referred to as digital gold, represents a physical ounce of the precious metal that has been recorded on a blockchain or other distributed ledger technology.
Each token is backed 1:1 by a securely stored physical bar, and the digital representation can be transferred, traded, or held in a custodial wallet just like any other cryptocurrency. While the underlying asset is as tangible as any traditional gold bar, the way it is owned, transferred and settled is fundamentally different, raising questions about which set of rules should apply. Under current UK law, any vehicle that pools investors’ money to purchase assets – including commodities such as gold – is typically classified as a collective investment scheme (CIS) and must comply with the rigorous fund rules set out in the Financial Services and Markets Act 2000 and subsequent EU-derived directives that remain on the books after Brexit. These rules cover everything from disclosure requirements and risk management to the need for an authorised manager and a prescribed level of capital.
While these safeguards are essential for protecting retail investors in traditional funds, they can be overly burdensome for digital‑asset projects that aim to provide a fast, low‑cost, and borderless way to own gold. The FCA’s contemplated exemption would carve out tokenised gold from the CIS regime, meaning that firms issuing or managing digital gold tokens would not be forced to register as authorised fund managers, nor would they need to produce the extensive prospectuses and compliance documentation that conventional funds must file. Instead, the FCA is looking to design a bespoke set of obligations that focus on the specific risks associated with tokenised commodities – such as custodial security, auditability of the underlying physical reserves, and anti‑money‑laundering (AML) controls – while dispensing with rules that are irrelevant to a blockchain‑based product.
One of the primary motivations behind this move is the desire to keep London at the forefront of the rapidly evolving tokenised‑asset market. Over the past few years, a number of fintech firms and traditional banks have set up operations in the city to develop platforms that issue tokenised gold, silver and other commodities. These platforms promise investors instant settlement, fractional ownership, and the ability to trade 24/7 across borders, features that are difficult to achieve under the existing fund framework.
By offering a regulatory carve‑out, the FCA hopes to provide certainty for innovators, attract further investment, and prevent the migration of tokenised‑gold projects to more permissive jurisdictions such as Switzerland or Singapore. The proposed framework would still retain core consumer‑protection elements. For example, any issuer of tokenised gold would be required to maintain an independent audit of the physical reserves, ensuring that each token is truly backed by an equivalent amount of gold stored in a recognised vault.
Moreover, robust AML and know‑your‑customer (KYC) procedures would be mandatory to prevent the misuse of digital tokens for illicit financing. The FCA is also expected to impose clear standards on the custody arrangements, requiring that custodians employ multi‑signature wallets, cold‑storage solutions, and insurance coverage against theft or loss. From a market‑structure perspective, the exemption could also simplify the process for asset managers who wish to incorporate tokenised gold into broader portfolios.
Currently, they must navigate the complex overlay of fund rules, which can deter the inclusion of digital commodities in traditional funds. A lighter regulatory regime would enable asset managers to offer tokenised gold as a line‑item in multi‑asset strategies, thereby broadening investor access and potentially increasing demand for the digital product.
Critics, however, have warned that loosening the regulatory net could expose retail investors to new types of risk, especially if the underlying custodial arrangements are not transparent or if the token’s smart‑contract code contains vulnerabilities. The FCA has acknowledged these concerns and indicated that any bespoke regime would be calibrated to balance innovation with investor safety. It plans to engage in a public consultation, inviting feedback from industry participants, consumer groups, and academic experts before finalising the rules. The Treasury’s involvement underscores the macro‑economic significance of the proposal.
By supporting a regulatory environment that nurtures tokenised gold, the UK government aims to capture the economic benefits of a burgeoning digital‑asset sector – from job creation in fintech and legal services to increased tax revenues and enhanced global competitiveness. The Treasury will likely assess the fiscal implications, such as whether tokenised gold should be subject to the same stamp‑duty or capital‑gains tax treatment as physical gold held in a traditional account. In summary, the FCA’s exploration of a tailored exemption for tokenised gold reflects a strategic effort to align the UK’s regulatory architecture with the realities of blockchain‑based assets while safeguarding investors and preserving London’s reputation as a leading financial centre. Should the exemption be enacted, it would provide a clear, proportionate set of rules that focus on the unique characteristics of digital gold, encouraging innovation, attracting capital, and ensuring that the UK remains at the cutting edge of the next wave of financial technology.