UK FCA weighs regulatory exemption for tokenized gold products

The UK Financial Conduct Authority has considered exempting certain tokenized gold products from existing fund rules as regulators examine how digital bullion could be used more easily across London’s wholesale financial markets. Summary The FCA is considering whether certain tokenized gold products should be exempt from UK collective investment scheme and alternative investment fund rules. The regulator is examining a dedicated framework for tokenized gold with the Treasury and Bank of England, though no decision has been made. UK regulators are studying whether tokenized bullion could make physical gold easier to divide, transfer and use as collateral in financial markets. The Bank of England is considering whether tokenized assets, including stablecoins, could qualify as collateral under its Sterling Monetary Framework. The Financial Conduct Authority will set out the potential changes on Monday as part of work with the Treasury and Bank of England on whether tokenized gold, or tokenized commodities more generally, need a dedicated regulatory framework. One option under consideration is a targeted exemption from rules covering collective investment schemes and alternative investment funds. No decision has been made, and FCA officials have said the regulator remains open to different approaches. Tokenized gold represents ownership rights over physical bullion held by an issuer or custodian. The digital tokens can then be transferred between investors while the underlying gold remains in storage. Industry participants have told the FCA that uncertainty over whether such products fall within the collective investment scheme, or CIS, and alternative investment fund, or AIF, frameworks could restrict which investors can access them. FCA could exempt tokenized gold from fund rules The regulator plans to work with the Treasury to assess whether certain tokenized gold products or related market infrastructure should receive a specific exemption from the CIS and AIF regulatory perimeter. The proposal builds on discussions that were already taking place between regulators and financial institutions. In August, crypto.news previously reported that the FCA was discussing tokenized gold standards with major banks and other market participants, including potential uses for digital bullion as collateral. Jon Relleen, the FCA’s director of infrastructure and exchanges, said tokenized gold had emerged as an area of interest during the regulator’s discussions with the industry. You might also like: UK crypto firms get five-month window to seek FCA approval “We’re keen to understand whether existing regulatory frameworks remain the right fit for gold markets and how innovation could strengthen the efficiency and competitiveness of UK markets,” Relleen said. The FCA sees a potential role for tokenization in making gold easier to divide and transfer through digital markets. Unlike shares and debt securities, which already move through established electronic infrastructure, bullion remains a physical asset with operational requirements around storage, custody and transfers.