The UK’s Financial Conduct Authority (FCA) is preparing a regulatory framework for tokenized gold as part of a wider push to digitize financial markets and shore up London’s dominance in global bullion trading, according to a report by the Financial Times.
The watchdog has held early discussions with industry members, including major banks, on how it could regulate the market to encourage its growth, people familiar with the plans told the newspaper.
What Is Being Considered
Tokenized gold involves issuing digital tokens that represent ownership rights in physical bullion, with gold bars held by the issuer as the backing asset. The appeal for a market like London’s is efficiency: the World Gold Council has argued that digital gold means ownership “would no longer be constrained by bar sizes, vault locations, or fragmented settlement mechanisms.”
According to the FT, the FCA has specifically sought feedback on how tokenized gold could be used as collateral in wholesale markets and is expected to announce plans to develop regulatory standards in the area within the next few months.
One structural wrinkle the discussions have had to address is jurisdictional: the FCA does not regulate trading in physical gold, though it does set rules for gold-based derivatives and exchange-traded products, so extending oversight to tokenized gold raises questions about where its remit begins.
Why Now: The China Challenge
The urgency is competitive. London dominates global gold trading with about 70% of volumes, per the World Gold Council, and its twice-daily LBMA price auction remains the benchmark used in contracts, derivatives, and central-bank reserves worldwide. But that position is under pressure from the East. “There’s huge competitive pressure from Shanghai and Hong Kong,” one person told the FT, warning that if London does not modernize through measures including tokenization, other venues could take the lead.
That threat is concrete and well-documented. Hong Kong is building a government-owned gold-clearing system, run by the Hong Kong Precious Metals Central Clearing Company and targeting a July 2026 launch, that mirrors the unallocated-account mechanism underpinning London’s market.
In January 2026, the company signed a memorandum of understanding with the Shanghai Gold Exchange, the world’s largest physical gold venue, creating a pipeline into mainland China’s market, and Hong Kong is courting central banks from Belt and Road countries while expanding gold-storage capacity toward 2,000 tons by 2029. Hong Kong’s financial secretary has said plainly that “the centre of gravity in gold trading is shifting eastward.” For the UK, tokenization is emerging as one of the tools to resist that shift.
Part of a Broader Digitization Push
The gold discussions sit inside a much larger UK agenda to digitize wholesale markets. Earlier this year, the FCA, the Bank of England, and the Prudential Regulation Authority published a joint call for input setting out a shared vision for tokenization and said they planned to set out further policy later this year on how tokenized collateral can operate under the existing regulatory framework. The regulators’ stated principles include treating tokenized and non-tokenized assets alike and avoiding fragmentation into disconnected liquidity pools.
Britain has already moved on adjacent fronts: the Digital Securities Sandbox is being used to test tokenized issuance and settlement, and the government’s tokenized gilt pilot, DIGIT, is targeting a first transaction in early 2027 on HSBC’s Orion platform. Chris Woolard, the Treasury’s newly appointed wholesale digital markets champion, told the FT last month that the country could gain a £33 billion economic boost by accelerating market digitization—the scale of ambition behind the effort.
A Market Already in Motion
Tokenized gold is not theoretical. HSBC, one of London’s major bullion clearers, launched a tokenized gold product for retail customers in Hong Kong just over two years ago, and the bank says more than $2.2 billion of it has since been traded across more than 276,000 transactions. Tokenized gold trading hit a record $90.7 billion in Q1 2026, surpassing the full-year 2025 total.
On the crypto-native side, tokens such as Tether’s XAU₮ and Paxos’s PAXG already offer blockchain-based, fully backed gold exposure, though the two together control roughly 97% of the sector, a concentration that has raised its own custody and counterparty concerns. Institutions from Singapore’s OCBC to Hang Seng have launched tokenized gold products. What the UK’s framework would add is regulatory certainty for wholesale and institutional use—the layer that could bring London’s vast over-the-counter bullion market, still heavily reliant on manual record-keeping, onto modern rails.
The Bigger Picture
The initiative captures a broader theme: tokenization is moving from crypto-native experiments into the core plumbing of traditional finance, driven as much by competitive geopolitics as by technology. For London, defending a centuries-old dominance in gold now means adopting the same blockchain infrastructure the crypto industry pioneered.
The move also underscores gold’s own moment—the metal hit a record of nearly $5,595 a troy ounce in January before easing to around $4,356 as the rally cooled. As of August 10, 7:06 UST, as per TradingView data, it is trading around $4,356. Whether a tokenized framework is enough to keep the bullion market’s center of gravity in London, rather than Shanghai, is now a live question, and the FCA’s coming announcement will be the first real signal of how hard the UK intends to fight for it.
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