UK Regulators Weigh Tokenized Gold as Wholesale Collateral

The Financial Conduct Authority and the Bank of England are currently engaged in high-level discussions with major banks to establish standards for digital gold. Rather than creating a standalone category for these tokens, regulators are leaning toward adapting existing wholesale market rules. The objective is to ensure that digital representations of physical gold maintain legal rights and risk profiles comparable to their conventional counterparts.

This initiative builds on a May policy paper from the FCA and the Prudential Regulation Authority, which identified tokenized assets as viable collateral for uncleared over-the-counter derivatives. With London handling approximately 70% of global gold trading—a market vaulting over $1.3 trillion in value—the stakes are significant. Competition from emerging Asian financial hubs has added urgency to these deliberations, as London seeks to maintain its dominance in bullion through technological integration.

Progress is moving beyond theory. Sixteen firms are testing live infrastructure through the Digital Securities Sandbox, while the Bank of England prepares system upgrades for 2027. Further policy roadmaps are expected later this year, detailing how these digital assets will function under the U.K. EMIR framework. For industry participants, the immediate focus remains on defining strict standards for custody, ownership, and risk, which will determine whether tokenized gold becomes a routine tool in the city’s financial engine.