The Financial Conduct Authority (FCA) has signalled that it is seriously examining the possibility of creating a specialised regulatory carve‑out for tokenised gold, a move designed to safeguard London’s position as a leading hub for precious‑metal investment products. This initiative is being pursued in close collaboration with Her Majesty’s Treasury, with the aim of developing a framework that recognises the unique characteristics of digital gold while ensuring that investors continue to enjoy a high level of protection. Tokenised gold, often referred to as digital gold, represents physical gold that has been converted into a blockchain‑based token.
Each token is typically backed one‑to‑one by an allocated amount of physical bullion stored in a secure vault, and the token can be transferred, traded, or held in a digital wallet in the same way as any other cryptocurrency. The technology promises greater liquidity, faster settlement, and broader accessibility for investors who might otherwise find it difficult to purchase or store physical gold.
Despite these advantages, the regulatory landscape for tokenised assets remains fragmented. In the United Kingdom, existing fund rules – particularly those set out in the Collective Investment Schemes sourcebook (CISA) – treat digital assets as a broad category, often imposing the same compliance burdens on tokenised commodities as on more speculative crypto‑tokens. Critics argue that this one‑size‑fits‑all approach can stifle innovation, deter issuers from locating in London, and ultimately push market participants to jurisdictions with more nuanced rules.
The FCA’s proposed exemption would therefore seek to separate tokenised gold from the generic “crypto‑asset” classification and place it under a bespoke regime that mirrors the treatment of traditional gold funds. Under such a regime, tokenised gold issuers would still be required to meet core investor‑protection standards – such as transparent disclosure of the underlying physical holdings, robust custody arrangements, and regular independent audits – but would be relieved of certain requirements that are unnecessary for a commodity‑backed token. For example, the need to conduct a full prospectus review for each new token issuance could be streamlined, and reporting obligations could be aligned with those already applicable to physical gold ETFs.
The Treasury’s involvement is crucial because any regulatory carve‑out must be consistent with broader financial‑stability objectives and with the United Kingdom’s commitments under international standards, such as those set by the Financial Action Task Force (FATF). By working together, the FCA and Treasury aim to craft rules that prevent money‑laundering and terrorist‑financing risks while avoiding excessive red tape that would hamper the growth of a legitimate, token‑based gold market. Industry stakeholders have welcomed the prospect of a tailored framework. Asset managers, custodians, and fintech firms that specialise in digital‑asset infrastructure argue that a clear, proportionate set of rules would give them the confidence to launch tokenised gold products in London, rather than seeking licences in more permissive jurisdictions such as Switzerland or Singapore.
Moreover, a London‑based tokenised gold market could attract a global investor base, ranging from retail savers looking for a low‑cost entry into gold exposure to institutional players seeking to incorporate digital gold into diversified portfolios. From a consumer‑protection perspective, the FCA emphasises that any exemption will not dilute the regulator’s core mandate.
Tokenised gold issuers would still need to demonstrate that the tokens are fully backed by physical bullion held in a reputable, insured vault, that the vault operator follows stringent security protocols, and that the tokens can be redeemed for the underlying metal on demand. Independent third‑party audits would be required on a regular basis, and the audit reports would need to be made publicly available to ensure transparency.
The potential exemption also aligns with the UK’s broader strategy to position London as a centre for “green” and “sustainable” finance. By facilitating a more efficient, digitised way to own and trade gold – a traditionally low‑carbon asset compared with many other commodities – the FCA’s move could be presented as part of a larger effort to modernise financial markets while supporting environmental objectives. Nevertheless, challenges remain.
Regulators must address technical questions around custody (e.g., whether the tokens are stored on a public blockchain or a permissioned ledger), the resilience of the underlying smart‑contract code, and the mechanisms for handling token splits or mergers. Additionally, cross‑border coordination will be essential, as tokenised gold can be transferred instantly across jurisdictions, raising questions about supervisory oversight and the applicability of foreign regulatory regimes. In the coming months, the FCA plans to publish a consultation paper outlining the proposed carve‑out, inviting feedback from market participants, consumer groups, and other stakeholders. The consultation will likely cover topics such as the definition of “tokenised gold,” the required level of disclosure, the acceptable forms of custody, and the reporting cadence for audit results.
Stakeholders will have the opportunity to suggest refinements, highlight potential risks, and propose additional safeguards. If the consultation leads to a final rule, the FCA expects that the new framework could be implemented within a year, providing a clear regulatory pathway for tokenised gold issuers. Such a timeline would give the market enough time to adjust, develop the necessary infrastructure, and launch compliant products that could compete on a global stage.
In summary, the FCA’s consideration of an exemption for tokenised gold reflects a pragmatic response to the evolving digital‑asset landscape. By crafting a bespoke regulatory regime in partnership with the Treasury, the UK aims to preserve London’s status as a premier financial centre, encourage responsible innovation in the gold market, and protect investors without imposing unnecessary burdens. The outcome of this initiative could set a precedent for how other tokenised commodities are treated, potentially shaping the future of digital finance across the globe.