The Financial Conduct Authority (FCA) has signalled a willingness to explore a bespoke regulatory framework that would carve out tokenised gold from the conventional fund regime that governs collective investment schemes in the United Kingdom. This move is being undertaken in close collaboration with Her Majesty’s Treasury and is motivated by a desire to protect and enhance London’s position as a leading global centre for innovative financial products, particularly those that blend traditional assets with cutting‑edge digital technology. Tokenised gold, also known as digital gold, refers to a blockchain‑based representation of physical gold that is stored in a secure vault and linked to a cryptographic token. Each token typically represents a specific weight of the underlying metal, and the token can be transferred, traded, or held in a digital wallet just like any other cryptocurrency.
Because the token is backed by a tangible, universally recognised commodity, many market participants view it as a bridge between the world of fiat‑backed securities and the rapidly expanding ecosystem of crypto‑assets. The FCA’s current regulatory remit includes the oversight of collective investment schemes (CIS), which are subject to a detailed set of rules covering everything from disclosure and valuation to risk management and investor protection. Under the existing regime, a fund that holds tokenised gold would be treated in the same way as a traditional fund that holds physical gold, meaning it would have to comply with the same reporting obligations, capital requirements and governance standards.
While these rules are designed to safeguard investors, they can also create friction for innovative products that operate on distributed ledger technology, where the speed, transparency and programmability of the token are core to its value proposition. By considering an exemption, the FCA hopes to achieve several strategic objectives. First, it aims to preserve the competitive edge of London’s financial markets by offering a regulatory environment that is both robust and flexible enough to accommodate new asset classes.
In recent years, other jurisdictions—particularly in the European Union and Asia—have introduced sandboxes or specific carve‑outs for digital assets, attracting firms that might otherwise locate elsewhere. A tailored exemption for tokenised gold would signal to fintech firms, asset managers, and custodians that the UK is open to innovation while still maintaining high standards of consumer protection. Second, the exemption could encourage greater liquidity and participation in the tokenised gold market. When regulatory uncertainty looms, institutional investors often hesitate to allocate capital to nascent products.
A clear, predictable framework would enable banks, pension funds and wealth managers to consider tokenised gold as a viable component of diversified portfolios, potentially increasing the overall depth of the market and reducing spreads between buying and selling prices. Third, the FCA’s approach is expected to address specific operational concerns that arise from the intersection of traditional fund law and blockchain technology.
For example, valuation of tokenised assets can be performed in near real‑time, unlike the daily or even less frequent pricing cycles used for conventional funds. An exemption could allow tokenised gold funds to adopt continuous pricing models, thereby providing investors with more accurate and timely information about the value of their holdings. Additionally, the settlement process for token transfers is typically instantaneous, which could streamline the redemption and distribution mechanisms that are often cumbersome under existing fund regulations.
The proposed framework would not be a blanket waiver of all regulatory responsibilities. The FCA has indicated that any exemption would still require robust safeguards, such as stringent custody arrangements, independent verification of the underlying gold reserves, and clear disclosure of the rights attached to each token. Moreover, anti‑money‑laundering (AML) and counter‑terrorist‑financing (CTF) obligations would remain in force, ensuring that the digital nature of the asset does not become a loophole for illicit activity.
Stakeholder consultation is expected to play a central role in shaping the final rules. The FCA plans to engage with a wide spectrum of market participants, including crypto‑exchange operators, traditional asset managers, custodians, legal experts, and consumer advocacy groups. Their feedback will help fine‑tune the balance between flexibility and protection, ensuring that the exemption does not inadvertently create regulatory arbitrage opportunities or undermine investor confidence.
If implemented, the exemption could set a precedent for other tokenised commodities, such as silver, platinum or even tokenised baskets of precious metals. It may also pave the way for more complex digital securities that combine physical backing with programmable features, such as automated dividend distribution or conditional transfer rights. In this sense, the FCA’s initiative could be viewed as a stepping stone toward a broader, more nuanced regulatory architecture that recognises the unique characteristics of blockchain‑based assets while preserving the integrity of the UK’s financial system. In summary, the FCA’s consideration of a bespoke exemption for tokenised gold reflects a strategic effort to keep London at the forefront of financial innovation.
By working closely with the Treasury to design a regulatory carve‑out that addresses valuation, custody, AML/CTF, and investor disclosure, the regulator aims to create a supportive environment for digital gold products without compromising the high standards of market integrity that have long defined the UK’s financial sector. The outcome of this consultation will be closely watched by industry participants worldwide, as it could signal the direction of future regulatory approaches to digital assets across the globe.