The UK Financial Conduct Authority is developing a regulatory framework for tokenized gold to modernize London's wholesale bullion trading infrastructure and protect the city's dominance in the global market.
London currently handles roughly 70 percent of global gold bullion trading by volume. The FCA is consulting with major banks on standards for gold-backed digital tokens that would serve as high-quality collateral in wholesale transactions, according to an announcement made August 10. The move addresses a structural constraint in physical gold trading: the settlement process and ownership transfers remain bound to the physical bar sizes and fragmented clearing systems that have governed the market for decades.
Tokenization would allow gold holdings to be divided into smaller units and transferred across digital ledgers without the delays and costs of moving metal bars or managing title across custodians. Banks would issue digital representations of gold reserves, denominated in units smaller than traditional ingots, that could settle faster and collateralize larger volumes of wholesale finance.
Shanghai has emerged as a competing gold trading hub, and China has moved aggressively to build out its own bullion market infrastructure and international settlement capability. The FCA is modernizing London's market through digital infrastructure in response to that competitive pressure, according to the regulator's reasoning.
The consultation with major banks indicates the FCA intends to move from exploratory work into rule-setting. No completion date or specific bank roster has been disclosed. Other regulators and central banks in Singapore, Hong Kong, and the UAE have run pilots for tokenized commodities and digital settlement infrastructure in recent years, though no jurisdiction has yet codified wholesale tokenized gold into formal regulatory guidelines.
London's 70 percent market share rests on the concentration of major bullion banks, dealers, and refineries in the city, plus the infrastructure built around the London Bullion Market Association's fixing mechanism and settlement practices. Any shift to tokenized settlement would require standardization across that ecosystem and likely integration with the Bank of England's Real-Time Gross Settlement system or a new digital wholesale platform.
The FCA's next move is the scope of the standards it publishes and which banks commit to adopting them before a formal rule goes live.
