FCA Weighs Fund Rule Exemption for Tokenized Gold in UK Market

Summary

• FCA considers targeted exemptions that could remove qualifying tokenized gold products from collective investment and alternative fund rules in Britain.
• Tokenization could simplify bullion ownership transfers while helping institutions divide physical gold for wholesale collateral and settlement purposes more efficiently.
• Clear regulation could strengthen London’s bullion leadership while establishing custody standards, ownership protections, and company responsibilities across digital asset markets.

Britain’s Financial Conduct Authority is considering tailored regulations that could exempt qualifying tokenized gold products from fund rules. According to the Financial Times, the regulator will present potential changes alongside the Treasury and Bank of England.

One option would remove certain products from rules covering collective investment schemes and alternative investment funds. However, officials have not selected an approach. Tokenized gold gives investors digital ownership rights over physical bullion stored by an issuer or custodian. Investors can transfer tokens without moving gold bars.

Industry representatives believe unclear classifications could restrict access and discourage companies from developing products within Britain. Existing uncertainty concerns whether tokenized bullion qualifies as a collective investment scheme or alternative investment fund. Either classification could impose unsuitable requirements.

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Tokenized Gold Could Strengthen London’s Wholesale Collateral Infrastructure

UK regulators are examining whether tokenized bullion could make physical gold more practical as collateral, since bullion involves complex operational requirements. Tokenization could simplify ownership transfers and divide bullion holdings without moving bars, consequently reducing delays associated with physical settlement.

Britain has strong incentives to establish clear rules because London handles approximately 70% of global bullion trading volumes. Tether Gold and Pax Gold already issue blockchain tokens backed by physical bullion, with their combined market capitalization reaching $4.4 billion.

Regulatory Clarity Could Support Wider Tokenized Gold Adoption

Regulatory treatment differs across jurisdictions, creating compliance challenges for companies serving several markets. Under the European Union’s MiCA framework, gold-backed tokens generally qualify as asset-referenced tokens.

Britain’s proposal would support wholesale markets and London’s substantial bullion reserves. Additionally, it supports broader plans for tokenized securities and settlement infrastructure.

Clear exemptions could encourage development while defining custody standards, ownership protections, and company responsibilities. Ultimately, regulators must balance easier access with transparent backing, dependable custody, and effective investor safeguards.

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