The UK's Financial Conduct Authority is discussing a dedicated framework that would let tokenized gold count as collateral in wholesale markets. The push comes as London, which handles around 70% of global gold trading, faces rising competition from Shanghai and Hong Kong. A formal consultation is expected to run into 2027.
The Financial Conduct Authority is in active discussions with major banks and industry players on a dedicated framework for tokenized gold, according to a Financial Times report cited by CoinGape. London handles around 70% of global gold trading, and regulators want to keep it that way. Spot gold, meanwhile, climbed past $4,326 on Friday, its highest in seven weeks, on a 7%+ weekly gain.
Tokenized gold as wholesale collateral
The FCA wants tokenized gold — digital tokens backed by physical gold held in custody — to work as collateral in wholesale markets, eligible alongside traditional collateral instruments. The target is uncleared OTC derivatives, where collateral efficiency shapes how much capital institutions must tie up.
That effort builds on a May 18, 2026 joint paper released by the FCA, the Bank of England, and the Prudential Regulation Authority. That paper named tokenized gold as a collateral candidate under UK EMIR rules, alongside tokenized money-market funds, saying both should receive the same prudential treatment as their non-tokenized counterparts.
Industry feedback on the paper closed in early July 2026, and the FCA is expected to publish a feedback statement before the end of summer. Further collateral policy and a cross-authority tokenization roadmap are due later in the year. The regulator does not currently oversee physical gold trading — that market is unregulated in the UK — but it does supervise gold-related derivatives and listed gold-linked products.
London's gold crown under pressure
London's dominance rests on deep liquidity, established vaulting infrastructure, and the LBMA benchmark. But Shanghai and Hong Kong are building capacity fast, and the City cannot afford to let digital infrastructure lag behind.
Tokenized gold offers three efficiency gains for institutions: near-instant 24/7 collateral mobilization, automated margin call processing, and reduced settlement friction on OTC derivatives. Those features matter more as markets shift toward programmable finance, where static collateral systems become a liability.
Risks still need resolving
Custody and audit standards for tokenized gold require careful design, particularly around legal title, proof-of-reserve auditing, and smart contract security. Gold price volatility also adds complexity to collateral stress-testing.
Source: CoinGape
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