FCA weighs easing fund rules for tokenized gold

The Financial Conduct Authority is considering exempting some tokenized gold products from UK fund rules to make them easier to buy. The FCA is discussing the idea with the Bank of England and HM Treasury and has not reached a decision. Officials expect to set out the approach on Monday.

Tokenized gold gives a blockchain-backed claim on physical bullion held in a vault and lets units be divided and transferred digitally. Regulators are seeking clarity on whether specific digital gold products fall under collective investment scheme rules or alternative investment fund rules, both of which restrict who may buy them.

Rather than changing the entire fund rulebook, officials are exploring a targeted exemption that would apply to particular gold tokens or parts of market infrastructure. FCA officials plan to say: “Unlike shares or debt securities, which are already issued, traded and settled through mature electronic market infrastructures, tokenization can make a traditionally physical and operationally complex asset easier to divide and transfer across digital markets.”

The Bank of England is carrying out parallel work on whether tokenized assets can be accepted as eligible collateral. The central bank plans a consultation later this year on allowing clearing houses to accept tokenized collateral and is considering whether some tokenized assets, including certain stablecoins, could be added to the Sterling Monetary Framework.

London accounts for roughly 70% of global over-the-counter gold trading. Leading tokenized gold products are issued outside the UK; Tether Gold (XAUT) and Pax Gold (PAXG) together back several billion dollars in distributed asset value. Monthly transfer volumes reached about $3.70 billion for XAUT and $1.61 billion for PAXG, up roughly 11% and 14% over 30 days.

Regulators have not indicated whether any exemption would be available to retail buyers or limited to wholesale desks and institutional collateral pledges. They are weighing where to draw the line between consumer-protection rules that apply to collective investment schemes and a narrower treatment for professional market participants.

Work on tokenized gold forms part of wider UK policy on digital assets, including stablecoin regulation and experiments with a digital pound for cross-border payments. Officials describe the aim as creating a clear legal framework for tokenization in wholesale markets while maintaining investor protections and market integrity.