FCA considers exempting tokenized gold from fund rules to defend London market

The UK's Financial Conduct Authority (FCA) is contemplating the creation of distinct regulations and exemptions for tokenized gold, according to industry sources. The Financial Times reported that the FCA, in collaboration with the Bank of England and HM Treasury, is exploring the possibility of a tailored regime for tokenized gold or tokenized commodities.

This move aims to make gold more divisible and transferable in digital markets, potentially enabling a larger portion of London's gold reserves to serve as collateral in financial transactions.

Unnamed industry participants have cautioned the FCA that uncertainty surrounding the categorization of tokenized gold products under the UK's collective investment scheme or alternative investment fund rules could impede development and restrict access for certain investors. The FCA has not yet made a final decision on the matter.

These proposals emerge as UK regulators strive to broaden tokenization across wholesale markets. The Bank of England is also contemplating the potential eligibility of tokenized assets, including stablecoins, as collateral under its Sterling Monetary Framework.

London currently holds the position of the world's premier over-the-counter gold market, contributing to approximately 70% of global notional trading volume, as stated by the World Gold Council. The UK is also in the process of formulating rules for stablecoins and piloting digital pound integration in cross-border payments. Additionally, the UK financial watchdog is mulling a possible lifting of the ban on prediction markets, as reported by a separate source.