The UK’s Financial Conduct Authority is considering exempting tokenized gold from the fund rules that govern collective investment schemes, according to a Financial Times report published Monday. The work is being developed with HM Treasury and the Bank of England and could place some digital gold products and gold-market infrastructure under a separate regulatory framework instead.
No formal consultation has been published and no decision has been taken. But the report marks the first time an asset class has been named specifically in the UK’s ongoing discussion about how tokenized real-world assets should be classified, and London’s position as one of the world’s three main bullion markets gives the question practical weight.
Why gold first
Gold is a cleaner test case than equities or bonds. It pays no dividends, carries no coupon schedule and requires no ongoing corporate disclosure. A bar is a bar. That simplicity is what makes a targeted exemption possible without opening the door to every other asset class at once.
The commercial logic is about collateral. London’s vaults hold enormous bullion reserves, but the metal inside them is largely static. Gold is expensive to move, slow to settle and cumbersome to pledge across borders. Tokenizing a bar turns it into something that can be transferred and posted as collateral in minutes rather than days. The FCA and the Prudential Regulation Authority have already recognized tokenized gold as a type of collateral for uncleared over-the-counter derivatives, so the direction of travel is not new.
The regulatory snag is classification. If a token representing allocated gold is treated as a fund unit, it inherits the disclosure, custody and authorization requirements that come with collective investment schemes and alternative investment funds. That weight is manageable for a large asset manager, and prohibitive for the fast, repeated collateral movements that make tokenization useful in the first place.
What the FCA is saying
John Llewellyn, the FCA’s director of infrastructure and exchanges, said the review is intended to assess whether the current framework remains appropriate for the gold market and whether innovation could create efficiencies and increase the competitiveness of UK markets. Industry participants have warned the regulator that tokenized gold currently falls between regimes: not a security in the traditional sense, but not a currency or a pure utility token either.
That ambiguity leaves issuers uncertain about which rules apply and leaves investors without a clear disclosure framework. The FCA’s willingness to consider bespoke rules suggests it has heard those warnings and is weighing whether the gaps are material enough to justify a dedicated regime.
No timeline yet
The open question is when any of this lands. The FCA has not announced a consultation period, a policy statement date or an implementation target, and neither the Treasury nor the Bank of England has committed to a public timetable. UK regulatory processes typically move through consultation, feedback, policy statement and implementation, a cycle that can take twelve to eighteen months or longer.
There is also an unresolved cross-border question. If a Swiss or Singaporean tokenized gold product sought distribution to UK funds, the FCA would need to decide whether the exemption applies to the product itself or only to UK-issued tokens. That has not been addressed in any public document.
The FCA has already moved on adjacent ground. In April it published final rules on fund tokenization under Policy Statement PS26/7, giving authorised funds a framework for using distributed ledger technology with immediate effect. Extending that work to tokenized commodities would be a natural next step, and the fund tokenization rules were built partly on the industry-led Blueprint model developed through the government’s Asset Management Taskforce.
The FCA has also signaled flexibility elsewhere in the tokenization agenda. Its fund rules allow unitholders to use different token standards for compliance, data-sharing and auditability, and they include guidance on token freeze and unfreeze functions for oversight. Firms managing UCITS and alternative investment funds received an extended exemption from overlapping permissions when operating tokenized fund registers, a sign the regulator prefers targeted carve-outs over wholesale rewrites.
The wider race
The UK is not alone in working through these questions. India’s securities regulator launched a tokenized corporate bond pilot with $107 million issued this month, with secondary trading and retail access planned for later phases of its Demat 2.0 program. European finance groups have pushed the EU to scrap caps on tokenized securities admitted to DLT infrastructure, proposing a 1.5 trillion euro baseline if a cap remains. Solana’s tokenized equity supply hit a record $684 million last week, up 47 percent in three weeks.
For London, the gold question is partly about defending an existing franchise. The city’s bullion market predates most of its financial industry, and regulators there have signaled they would rather write rules that keep tokenized gold trading in London than watch it migrate to more permissive jurisdictions. A dedicated framework would also give institutional investors a clearer path to hold gold exposure onchain without the operational workload of moving physical bars between vaults.
Custody and audit of the underlying metal remain the real risk in any tokenized gold design. Whoever holds the bars, and how their claims are verified, determines whether a token is a reliable claim on metal or just a promise. Regulators writing the exemption will have to answer that question explicitly, because fund rules currently provide much of the investor protection that a bespoke regime would need to recreate.
The next concrete signal would be a formal consultation or discussion paper from the FCA. Until then, the FT report stands as the only public indication that the regulator is actively considering the issue, and market participants should treat it as an early signal rather than a near-term catalyst.