UK considers exempting tokenized gold from key fund rules as London aims to stay global leader

The UK Financial Conduct Authority (FCA) is evaluating whether to exempt tokenized gold from fund regulations that apply to collective investment schemes and alternative investment funds. The regulator will publish its stance on the matter on Monday. Industry concern sparks regulatory review The FCA, in collaboration with the Treasury and the Bank of England, is examining if tokenized gold and other tokenized commodities require a dedicated regulatory framework. This joint study reflects growing interest in the digital representation of physical assets within the UK’s influential financial sector. Tokenized gold transforms ownership of physical bullion into digital tokens. While the actual gold remains securely stored, the tokens can be freely traded or transferred by investors across digital platforms. One proposal under consideration by the FCA is a targeted exemption for tokenized gold products from existing fund rules. However, no final decision has been announced. Industry participants have highlighted that uncertainty over regulatory classification complicates the process for companies and limits clarity on potential investor eligibility. Jon Relleen, director of infrastructure and exchanges at the FCA, noted that tokenized gold has become a significant topic in discussions with market participants. He emphasized that the FCA aims to determine whether current regulations continue to suit the evolving gold market. Mini dictionary: FCA (Financial Conduct Authority), the UK’s main financial regulatory body that oversees conduct in financial markets to protect consumers and maintain market integrity. Impact on gold markets and global positioning Gold is traditionally recognized as a physical asset that is less efficient to move than stocks or bonds. Tokenizing bullion could introduce new efficiencies by allowing ownership to be split, facilitated, and settled through digital channels. The UK currently accounts for around 70% of global gold trading, according to the World Gold Council. As China expands its own bullion market, London officials remain focused on maintaining the city’s dominant role. Tokenized gold products such as Tether Gold and Pax Gold are already available outside the UK. In July, their combined market value reached about $4.4 billion. Tokenized ProductIssuerMarket Value (July)Tether GoldTether$4.4 billion* (combined with Pax Gold)Pax GoldPaxos$4.4 billion* (combined with Tether Gold)*Combined value as of July. Regional regulations differ. Within the European Union, gold-backed tokens are categorized as asset-referenced tokens under the Markets in Crypto-Assets regulation. As of July, none had been officially approved. Collateral frameworks and digital innovation Gold-backed tokens are already used as collateral in parts of the digital asset market. By late August, lending platform Aave reached its $25 million cap for loans backed by Tether Gold. Arch Lending, a crypto lending company, began accepting tokenized gold as collateral at value ratios up to 75%. These early examples indicate the growing role of digital gold in decentralized finance.